<PAGE> 1
PACIFIC HORIZON GROWTH FUNDS
SEMI-ANNUAL REPORT
August 31, 1997
Aggressive Growth Fund
Blue Chip Fund
Investing For All
The Times Of Your Life
NOT FDIC INSURED
PACIFIC HORIZON GROWTH FUNDS
<PAGE> 2
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
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INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
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<PAGE> 3
CONTENTS
<TABLE>
<S> <C>
.
. FUND FACTS 2-3
.
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
.
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
.
. PACIFIC HORIZON AGGRESSIVE GROWTH
. FUND
. Portfolio of Investments 10-13
. Statement of Assets
. and Liabilities 14
. Statement of Operations 15
. Statements of Changes
. in Net Assets 16
.
. PACIFIC HORIZON BLUE CHIP FUND
. Statement of Assets
. and Liabilities 17
. Statement of Operations 18
. Statements of Changes
. in Net Assets 19
. NOTES TO FINANCIAL STATEMENTS 20-27
.
. FINANCIAL HIGHLIGHTS 28-32
.
. MASTER INVESTMENT TRUST, SERIES
. I -- BLUE CHIP PORTFOLIO
. Portfolio of Investments 33-36
. Statement of Assets
. and Liabilities 37
. Statement of Operations 38
. Statements of Changes
. in Net Assets 39
. Notes to Financial Statements 40-42
. Supplementary Data 43
</TABLE>
<PAGE> 4
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 5
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
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3
<PAGE> 6
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 7
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 8
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 9
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 10
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 11
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 12
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ----------------------------------------------------------------------- -------- ------------
<S> <C> <C>
COMMON STOCK -- 97.3%
AEROSPACE/DEFENSE -- EQUIPMENT -- 3.3%
BE Aerospace, Inc.*................................................... 72,750 $ 2,582,625
REMEC, Inc.*.......................................................... 134,050 4,473,919
------------
7,056,544
------------
AGRICULTURAL OPERATIONS -- 1.6%
Northland Cranberries, Inc. .......................................... 204,000 3,493,500
------------
AIRLINES -- 1.7%
Airways Corp.*........................................................ 112,500 597,656
Mesaba Holdings, Inc.*................................................ 156,600 3,073,275
------------
3,670,931
------------
BIOTECHNOLOGY -- 3.0%
Genome Therapeutics Corp.*............................................ 149,700 1,188,244
Human Genome Sciences, Inc.*.......................................... 44,300 1,650,175
Protein Design Labs, Inc.*............................................ 100,000 3,562,500
------------
6,400,919
------------
BROADCASTING -- 3.0%
All American Communications, Inc.*.................................... 174,600 2,444,400
Cablevision Systems Corp.*............................................ 31,350 1,573,378
United International Holdings, Inc.*.................................. 228,250 2,439,422
------------
6,457,200
------------
BUILDING AND HOME FURNISHINGS -- 1.4%
Advanced Lighting Technologies, Inc.*................................. 120,750 2,898,000
------------
BUSINESS SERVICES -- 3.4%
Accustaff, Inc.*...................................................... 126,450 3,358,828
Professional Staff PLC*............................................... 104,400 1,455,075
Select Appointments Holdings Public Limited Company ADR............... 135,500 2,439,000
------------
7,252,903
------------
CLOTHING & APPAREL -- 3.0%
Farah, Inc.*.......................................................... 153,000 1,195,312
Novel Denim Holdings Limited*......................................... 49,600 1,085,000
Quicksilver, Inc.*.................................................... 124,050 4,225,453
------------
6,505,765
------------
COMMERCIAL SERVICES -- 2.9%
NCO Group, Inc.*...................................................... 48,050 1,801,875
PMT Services, Inc.*................................................... 258,000 4,353,750
------------
6,155,625
------------
COMPUTERS -- PERIPHERAL EQUIPMENT -- 1.5%
Cybex Computer Products Corp.*........................................ 125,900 3,147,500
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 13
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ----------------------------------------------------------------------- -------- ------------
<S> <C> <C>
COMPUTER SERVICES & SOFTWARE -- 5.5%
3D Labs, Inc., Ltd.*.................................................. 120,800 $ 4,786,700
Cimatron Ltd.*........................................................ 479,600 1,978,350
DataWorks Corp.*...................................................... 91,750 1,513,875
Rogue Wave Software, Inc.*............................................ 189,100 2,765,588
Spectrum HoloByte, Inc.*.............................................. 160,300 771,444
------------
11,815,957
------------
CONSUMER PRODUCTS & SERVICES -- 0.6%
Meade Instruments Corp.*.............................................. 166,300 1,268,037
------------
CONSUMER SERVICES -- OTHER -- 1.3%
Equity Corp. International*........................................... 120,000 2,767,500
------------
CONTAINERS AND PACKAGING -- 0.8%
Gaylord Container Corp.*.............................................. 179,600 1,694,975
------------
DIVERSIFIED OPERATIONS -- 1.9%
Volt Information Sciences, Inc.*...................................... 74,350 4,149,659
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 4.8%
Actel Corp.*.......................................................... 82,500 1,675,781
EMCORE Corp.*......................................................... 144,000 3,276,000
International Rectifier Corp.*........................................ 170,000 3,878,125
Ultrak, Inc.*......................................................... 135,200 1,428,050
------------
10,257,956
------------
ENTERTAINMENT & LEISURE -- 6.3%
Family Golf Centers, Inc.*............................................ 119,000 2,759,312
Galoob Toys, Inc.*.................................................... 142,500 2,956,875
Iwerks Entertainment, Inc.*........................................... 151,550 549,369
Sodak Gaming, Inc.*................................................... 102,100 1,391,113
WMS Industries, Inc.*................................................. 223,000 5,505,313
------------
13,161,982
------------
ENVIRONMENTAL SERVICES -- 3.3%
Air & Water Technologies Corp.*....................................... 461,000 1,383,000
Culligan Water Technologies, Inc.*.................................... 45,500 2,098,687
Osmonics, Inc.*....................................................... 71,500 1,215,500
TETRA Technologies, Inc.*............................................. 109,050 2,290,050
------------
6,987,237
------------
FINANCIAL SERVICES -- 4.4%
Consumer Portfolio Services, Inc.*.................................... 81,000 1,427,625
Imperial Credit Industries, Inc.*..................................... 185,200 3,449,350
SEI Investments Co. .................................................. 158,550 4,597,950
------------
9,474,925
------------
FOOD -- 0.7%
Unimark Group, Inc.*.................................................. 183,800 1,596,763
------------
</TABLE>
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See Notes to Financial Statements.
11
<PAGE> 14
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ----------------------------------------------------------------------- -------- ------------
<S> <C> <C>
HEALTHCARE SERVICES -- 5.0%
Emeritus Corp.*....................................................... 148,150 $ 2,092,619
Envoy Corp.*.......................................................... 116,500 3,145,500
Orthodontic Centers of America, Inc.*................................. 103,000 1,763,875
ProMedeCo Management Co.*............................................. 67,400 471,800
SeaMED Corp.*......................................................... 187,000 3,272,500
------------
10,746,294
------------
HOUSEHOLD PRODUCTS -- 0.8%
Lifetime Hoan Corp.*.................................................. 226,600 1,756,150
------------
INSTRUMENTS -- CONTROLS -- 0.6%
Metrika Systems Corp.*................................................ 87,300 1,331,325
------------
MANUFACTURING -- 2.5%
Astrotech International Corp.*........................................ 123,600 1,390,500
ITEQ, Inc.*........................................................... 197,600 2,445,300
Memtec, Ltd. ......................................................... 72,750 1,445,906
------------
5,281,706
------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.0%
Endosonics Corp.*..................................................... 175,200 2,058,600
------------
METALS & MINING -- 1.9%
Titanium Metals Corp.*................................................ 111,450 3,984,338
------------
OIL & GAS -- 5.7%
Cairn Energy USA, Inc.*............................................... 179,000 2,047,312
Costilla Energy, Inc.*................................................ 189,500 1,942,375
Eagle Geophysical, Inc.*.............................................. 59,200 1,213,600
Eastern Enterprises................................................... 28,150 1,004,603
Ocean Energy, Inc. *.................................................. 45,000 2,894,062
United Meridian Corp.*................................................ 79,600 3,119,325
------------
12,221,277
------------
PHARMACEUTICALS -- 1.2%
Algos Pharmaceutical Corp.*........................................... 102,200 2,210,075
Kendle International Inc.*............................................ 25,000 400,000
SEQUUS Pharmaceuticals, Inc.*......................................... 350 2,362
------------
2,612,437
------------
RESTAURANTS -- 1.6%
Landry's Seafood Restaurants, Inc.*................................... 145,000 3,480,000
------------
RETAIL -- SPECIALTY STORES -- 4.6%
Petco Animal Supplies, Inc.*.......................................... 124,200 3,679,425
Stage Stores, Inc.*................................................... 104,150 3,222,141
The Wet Seal, Inc.*................................................... 145,350 3,161,363
------------
10,062,929
------------
RETAIL & MERCHANDISING -- 1.9%
Kennoth Cole Productions, Inc.*....................................... 178,500 2,465,531
RDO Equipment Co.*.................................................... 69,700 1,594,388
------------
4,059,919
------------
</TABLE>
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See Notes to Financial Statements.
12
<PAGE> 15
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ----------------------------------------------------------------------- -------- ------------
<S> <C> <C>
TELECOMMUNICATIONS -- SERVICES/EQUIPMENT -- 14.2%
ANTEC Corp.*.......................................................... 292,000 $ 3,942,000
Boston Communications Group, Inc.*.................................... 145,100 2,158,362
Brooks Fiber Properties, Inc.*........................................ 66,200 2,225,975
Gilat Satellite Networks, Ltd.*....................................... 113,950 3,703,375
Intermedia Communications, Inc.*...................................... 68,000 2,431,000
Iridium World Communications, Ltd.*................................... 108,450 3,890,644
LCC International, Inc.*.............................................. 80,550 1,449,900
NICE-Systems Ltd. ADR*................................................ 116,850 4,666,697
Ortel Corporation*.................................................... 139,400 3,293,325
Teledata Communications, Ltd.*........................................ 80,600 2,780,700
------------
30,541,978
------------
TRANSPORTATION -- COMMERCIAL SERVICES -- 1.3%
Budget Group, Inc.*................................................... 95,000 2,790,625
------------
WHOLESALE DISTRIBUTORS -- 0.6%
NuCo2, Inc.*.......................................................... 84,100 1,387,650
------------
TOTAL INVESTMENTS(A) -- 97.3% (COST $168,352,278)...................... 208,529,106
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.7%.......................... 5,877,977
------------
NET ASSETS -- 100.0%................................................... $214,407,083
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $214,407,083.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $ 51,792,321
Unrealized depreciation................................. (11,615,493)
------------
Net unrealized appreciation............................. $ 40,176,828
============
</TABLE>
* Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements.
13
<PAGE> 16
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $168,352,278)............ $208,529,106
Cash............................................................... 6,710,472
Dividends Receivable............................................... 26,723
Receivable for investment securities sold.......................... 1,559,469
Receivable for capital shares sold................................. 127,153
Prepaid expenses................................................... 10,143
------------
Total Assets......................................................... 216,963,066
------------
LIABILITIES:
Payable for investment securities purchased........................ 1,261,219
Payable for capital shares redeemed................................ 902,471
Investment advisory fees payable................................... 107,955
Administration fees payable........................................ 53,977
Shareholder service fees payable (A and K Shares).................. 44,981
12b-1 fees payable (K Shares)...................................... 444
Transfer agent fees payable........................................ 139,853
Legal fees payable................................................. 5,519
Other accrued expenses............................................. 39,564
------------
Total Liabilities.................................................... 2,555,983
------------
NET ASSETS........................................................... $214,407,083
============
Net Assets
A Shares........................................................... $213,283,577
K Shares........................................................... 1,123,506
------------
Total................................................................ $214,407,083
------------
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares........................................................... 9,971,300
K Shares........................................................... 52,853
------------
Total................................................................ 10,024,153
============
NET ASSET VALUE:
A Shares -- redemption price per share............................. $21.39
======
Maximum Sales Charge (A Shares).................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge)).................................. $22.40
======
K Shares -- offering and redemption price per share................ $21.26
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par..................................... $ 10,024
Additional paid-in capital......................................... 182,177,783
Accumulated undistributed net investment income (loss)............. (1,263,592)
Accumulated net realized losses on investment transactions......... (6,693,960)
Net unrealized appreciation on investments......................... 40,176,828
------------
NET ASSETS, AUGUST 31, 1997.......................................... $214,407,083
============
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 17
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31. 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend............................................................ $ 103,222
Interest............................................................ 121,693
-----------
Total Income.......................................................... 224,915
-----------
EXPENSES:
Advisory fees....................................................... 596,019
Administration fees................................................. 298,009
Shareholder service fees (A Shares)................................. 247,405
Shareholder service fees (K Shares)................................. 936
12b-1 fees (K Shares)............................................... 2,807
Custodian and fund accounting fees.................................. 29,784
Transfer agent fees................................................. 220,714
Legal fees.......................................................... 8,260
Other expenses...................................................... 84,092
-----------
Total Expenses................................................ 1,488,026
Less: Fee waivers..................................................... (936)
-----------
Total Net Expenses.................................................... 1,487,090
-----------
NET INVESTMENT LOSS................................................... (1,262,175)
-----------
NET REALIZED/UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized loss on investment transactions........................ (5,865,048)
Net change in unrealized appreciation on investments................ 34,925,302
-----------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS.......................... 29,060,254
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $27,798,079
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 18
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment (losses)....................... $ (1,262,175) $ (2,598,857)
Net realized gains (losses) on investment
transactions................................ (5,865,048) 53,488,080
Net change in unrealized appreciation on
investments................................. 34,925,302 (30,785,939)
------------ ------------
Change in net assets resulting from
operations.................................. 27,798,079 20,103,284
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains from investment
transactions
A Shares................................ (9,411,755) (48,764,827)
K Shares................................ (40,112) (22,851)(a)
------------ ------------
Change in net assets from shareholder
distributions................................. (9,451,867) (48,787,678)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................... 80,555,793 554,405,607
Dividends reinvested.......................... 8,903,279 46,851,878
Cost of shares redeemed....................... (95,644,964) (550,673,264)
------------ ------------
Change in net assets from capital share
transactions.................................. (6,185,892) 50,584,221
------------ ------------
Change in net assets............................ 12,160,320 21,899,827
NET ASSETS:
Beginning of Period........................... 202,246,763 180,346,936
------------ ------------
End of Period (including undistributed net
investment losses of $1,263,592 and $1,417,
respectively.).............................. $214,407,083 $ 202,246,763
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
16
<PAGE> 19
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I -- Blue Chip
Portfolio, at value............................................. $538,657,972
Prepaid expenses.................................................. 35,671
------------
Total Assets........................................................ 538,693,643
------------
LIABILITIES:
Dividend payable.................................................. 4,020
Administration fees............................................... 69,781
Transfer agent fees payable....................................... 47,718
Shareholder service fees payable (A, K and SRF Shares)............ 55,144
Audit fees payable................................................ 12,242
Fund accounting fees and expense payable.......................... 11,919
Legal fees payable................................................ 18,438
Other accrued expenses............................................ 91,342
------------
Total Liabilities................................................... 310,604
------------
NET ASSETS.......................................................... $538,383,039
============
Net Assets
A Shares.......................................................... $216,029,073
K Shares.......................................................... 3,066,143
SRF Shares........................................................ 319,287,823
------------
Total............................................................... $538,383,039
============
Shares Outstanding ($0.001 par value, 300 million shares
authorized):
A Shares.......................................................... 8,002,386
K Shares.......................................................... 113,795
SRF Shares........................................................ 13,226,292
------------
Total............................................................... 21,342,473
============
NET ASSET VALUE:
A Shares -- redemption price per share............................ $27.00
======
Maximum Sales Charge (A Shares)................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge))................................. $28.27
======
K Shares -- offering and redemption price per share............... $26.94
======
SRF Shares -- offering and redemption price per share............. $24.14
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................... $ 21,342
Additional paid-in capital........................................ 416,754,130
Distributions in excess of net investment income.................. (181,737)
Accumulated net realized gains on investment transactions......... 22,587,253
Net unrealized appreciation on investments........................ 99,202,051
------------
NET ASSETS, AUGUST 31, 1997......................................... $538,383,039
============
</TABLE>
- ---------------
See Notes to Financial Statements.
17
<PAGE> 20
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I -- Blue
Chip Portfolio:
Dividend income................................................ $ 2,668,734
Interest income................................................ 254,784
------------
2,923,518
Expenses....................................................... 1,039,153
------------
Net Investment Income from Master Investment Trust, Series I -- Blue
Chip Portfolio..................................................... 1,884,365
------------
EXPENSES:
Shareholder service fees (A Shares)................................ 231,243
Shareholder service fees (K Shares)................................ 2,800
Shareholder service fees (SRF Shares).............................. 155,322
12b-1 fees (K Shares).............................................. 5,598
Administration fees................................................ 233,232
Transfer Agent fees................................................ 136,079
Registration fees.................................................. 23,592
Reports to shareholders............................................ 64,355
Fund accounting fees and expenses.................................. 30,564
Amortization of organization costs................................. 14,168
Audit fees......................................................... 3,570
Legal fees......................................................... 6,271
Directors' fees.................................................... 2,291
Other expenses..................................................... 39,446
------------
Total Expenses............................................... 948,531
Less: Fee waivers and expense reimbursements......................... (221,475)
------------
Total Net Expenses................................................. 727,056
------------
NET INVESTMENT INCOME................................................ 1,157,309
------------
REALIZED/UNREALIZED GAINS ON INVESTMENTS FROM INVESTMENT TRUST,
SERIES I -- BLUE CHIP PORTFOLIO:
Net realized gains on investment transactions.................... 32,224,675
Net change in unrealized appreciation on investments............. 80,612,767
------------
Net realized/unrealized gains on investments from Master Investment
Trust, Series I -- Blue Chip Portfolio............................. 112,837,442
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $113,994,751
============
</TABLE>
- ---------------
See Notes to Financial Statements.
18
<PAGE> 21
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income........................ $ 1,157,309 $ 1,022,481
Net realized gains on investment
transactions............................... 32,224,675 14,059,189
Net change in unrealized appreciation on
investments................................ 80,612,767 12,101,556
------------ ------------
Change in net assets resulting from
operations................................. 113,994,751 27,183,226
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares............................... (556,688) (980,276)
K Shares............................... (2,671) (998)(a)
SRF Shares (b)......................... (957,833) --
Net realized gains from investment
transactions:
A Shares............................... (11,977,846) (2,731,645)
K Shares............................... (149,419) (8,357)(a)
SRF Shares (b)......................... (9,569,624) --
------------ ------------
Change in net assets from shareholder
distributions................................ (23,214,081) (3,721,276)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................. 315,283,391 87,766,406
Dividends reinvested......................... 11,058,303 3,417,983
Cost of shares redeemed...................... (32,940,898) (27,378,220)
------------ ------------
Change in net assets from capital share
transactions................................. 293,400,796 63,806,169
------------ ------------
Change in net assets........................... 384,181,466 87,268,119
NET ASSETS:
Beginning of Period.......................... 154,201,573 66,933,454
------------ ------------
End of Period (including distributions in
excess of $181,737 and undistributed net
investment income of $178,145,
respectively.)............................. $538,383,039 $ 154,201,573
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
See Notes to Financial Statements.
19
<PAGE> 22
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Aggressive
Growth Fund (the "Aggressive Growth Fund") and the Pacific Horizon Blue Chip
Fund (the "Blue Chip Fund"), collectively the "Funds", individually the "Fund".
The Funds offer A Shares and effective July 22, 1996 began offering K Shares on
June 23, 1997, the Seafirst Blue Chip Fund merged into the Pacific Horizon Blue
Chip Fund and the Pacific Horizon Blue Chip Fund began offering SRF Shares. A
Shares and SRF Shares have a Shareholder Services Plan while K Shares have a
Distribution Plan and an Administrative and Shareholder Services Plan.
The Aggressive Growth Fund seeks to maximize capital appreciation through
investments in common stocks and convertible securities. The Blue Chip Fund
seeks to achieve its investment objective by investing substantially all of its
assets in the Blue Chip Portfolio (the "Portfolio") of the Master Investment
Trust, Series I (the "Trust"), an open-end management company that has the same
investment objective as that of the Blue Chip Fund. The value of the Blue Chip
Fund's investment in the Portfolio included in the accompanying Statement of
Assets and Liabilities reflects the Fund's proportionate beneficial interest in
the net assets of the Portfolio (90.7% at August 31, 1997). The financial
statements of the Portfolio, including its portfolio of investments, are
included elsewhere within this report and should be read in conjunction with the
Blue Chip Fund's financial statements.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Aggressive Growth Fund's
investment adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned
subsidiary BISYS Fund Services, Limited Partnership, served as the Funds'
administrator through September 15, 1997. Concord Financial Group, Inc. (the
"Distributor"), an indirect, wholly-owned subsidiary of BISYS, served as the
distributor of the Funds' shares through September 15, 1997. BISYS Fund
Services, Inc. ("BISYS Ohio"), also a wholly-owned subsidiary of BISYS, served
as transfer and dividend disbursing agent of the Funds through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds
20
<PAGE> 23
pursuant to the terms of an Administration Agreement between the Company and
Bank of America (the "Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), and
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the Funds.
Change in Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The Aggressive Growth Fund values portfolio securities (other than debt
securities with remaining maturities of 60 days or less) at the last reported
sales price on the securities exchange on which such securities are primarily
traded or at the last reported sales price on the NASDAQ National Securities
Market. Securities not listed on an exchange or the NASDAQ National Securities
Market or securities for which there were no transactions are
21
<PAGE> 24
valued at the mean between the current quoted bid and ask prices on the date of
valuation. Bid price is used when no ask price is available. The Fund may also
use an independent pricing service, approved by the Board of Directors, to value
certain of their 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 Directors. Debt securities with remaining maturities of 60 days
or less are valued at amortized cost, which approximates market value.
The valuation of securities of the Blue Chip Fund's investment in the
Portfolio is discussed in Note 2 of the Portfolio's financial statements.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Aggressive Growth Fund records security transactions on a trade date
basis. Interest income, including accretion of discount and amortization of
premium, is accrued daily. Dividend income is recognized on the ex-dividend
date. Realized gains and losses from security transactions are recorded on an
identified cost basis.
The Blue Chip Fund records its share of the investment income, expenses and
realized and unrealized gains and losses recorded by the Portfolio on a daily
basis. The investment income, expenses and realized and unrealized gains and
losses are allocated daily to investors in the Portfolio based upon the value of
their investments in the Portfolio. Such investments are adjusted on a daily
basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
The Blue Chip Fund incurred certain costs in connection with its
organization. Such costs have been deferred and are being amortized on a
straight-line basis over five years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income, if any, is declared and paid as a dividend
to shareholders of record at the close of business on record date at least
annually for the Aggressive Growth Fund and quarterly for the Blue Chip Fund.
Net realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains of the
22
<PAGE> 25
Funds can be offset by capital loss carryovers of the Funds, such gains will not
be distributed. Dividends and distributions are recorded by the Funds on the ex-
dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
ACCUMULATED NET
UNDISTRI- REALIZED
BUTED NET GAIN/(LOSS)
INVESTMENT ON
INCOME INVESTMENTS
---------- -----------
<S> <C> <C>
Aggressive
Growth Fund $2,598,657 $(2,588,091)
Blue Chip Fund -- 72
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Aggressive Growth Fund has an Investment Advisory Agreement with Bank of
America and the Funds had an Administration Agreement with BISYS and a
Distribution Agreement with the Distributor. Pursuant to the terms of the
Investment Advisory Agreement, Bank of America is entitled to a fee from the
Aggressive Growth Fund, which is accrued daily and payable monthly, at an annual
rate of 0.60% of the Fund's average daily net assets. Pursuant to the terms of
the Administration Agreement, BISYS is entitled to a fee which is accrued daily
and payable monthly, at an annual rate of 0.30% and 0.15% of the average daily
net assets of the Aggressive Growth Fund and
23
<PAGE> 26
Blue Chip Fund, respectively. For the six months ended August 31, 1997, BISYS
agreed to waive $73,396 of its fee as Administrator for the Blue Chip Fund. For
the six months ended August 31, 1997, BISYS reimbursed $303 of operating
expenses of the Blue Chip Fund.
For the six months ended August 31, 1997, the Distributor advised the Funds
that it retained $25,093 and $90,494 from commissions earned on sales of the
Aggressive Growth Fund's and Blue Chip Fund's shares, respectively. For the same
period, Bank of America and its affiliates advised the Funds that they retained
$151,195 and $706,924 from commissions earned on sales of shares of the
Aggressive Growth Fund and Blue Chip Fund, respectively.
The Funds have a Shareholder Services Plan (the "Plan") under which each
Fund pays the Distributor for shareholder servicing expenses incurred in
connection with A Shares of each Fund. Under the Plan, payments for shareholder
servicing expenses may not exceed 0.25% of each Fund's average daily net assets
for A Shares. For the six months ended August 31, 1997, the Aggressive Growth
Fund and Blue Chip Fund incurred charges of $247,405 and $231,243, respectively,
pursuant to the Plan. The Funds were advised that of these amounts, the
Distributor retained $141,200 and $32,170 from the Aggressive Growth Fund and
Blue Chip Fund, respectively, and affiliates of Bank of America retained $99,984
and $194,756, respectively. The Plan provides that if, in any month, the fees
paid to the Distributor are less than the costs incurred by the Distributor, the
excess costs will be included in future computations of the fee, provided that
any excess costs will not be carried forward beyond the end of the fiscal year
in which such excess costs were incurred.
The Funds have adopted a Distribution Plan and an Administrative and
Shareholder Services Plan (the "Administrative Plan") with respect to K Shares
of the Funds. Under the Distribution Plan, the Funds pay the Distributor for
expenses primarily intended to result in the sale of the Funds' K Shares. Under
the Distribution Plan, payments by the Funds for distribution expenses may not
exceed 0.75% of the average daily net assets of each Fund's K Shares. Payments
for distribution expenses under the Distribution Plan are subject to Rule 12b-1
under the Act. Under the Administrative Plan, the Funds pay for expenses
incurred in connection with shareholder services provided by the Distributor and
payments to Service Organizations for the provision of support services with
respect to beneficial owners of K Shares. Under the Administrative Plan,
payments for shareholder services and administrative services may not exceed
0.25% and 0.75%, respectively, of the average daily net assets of each Fund's K
Shares. The total of all payments under the Distribution Plan and the
Administrative Plan may not exceed, in the aggregate, the annual rate of 1.00%
of the average daily net assets of each Fund's K Shares. For the six months
ended August 31, 1997, the Distributor incurred charges $1,871 and $5,581 for
24
<PAGE> 27
the Aggressive Growth and Blue Chip Funds, respectively.
The Blue Chip Fund has a Shareholder Services Plan under which the Fund pays
the Distributor for shareholder servicing expenses incurred in connection with
the SRF shares. Under the Plan, payments for shareholder servicing expenses may
not exceed 0.25% of the Fund's average daily net assets for SRF Shares. For the
six months ended August 31, 1997, The Blue Chip Fund incurred charges of
$155,322, pursuant to the Plan, the Fund was advised that of this amount the
affiliates of Bank of America retained $16,258. For the same period $139,064 of
shareholder servicing were waived by The Blue Chip Fund.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $220,714 and $136,079 from the Aggressive
Growth Fund and Blue Chip Fund, respectively, for the six months ended August
31, 1997.
For the six months ended August 31, 1997, the Aggressive Growth Fund and
Blue Chip Fund incurred legal charges totaling $8,260 and $6,271, respectively,
which were earned by a law firm, a partner of which serves as Secretary of the
Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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
25
<PAGE> 28
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 pursuant to the Retirement Plan amounted to
$736 and $210 for the Aggressive Growth Fund and Blue Chip Fund, respectively,
for the six months ended August 31, 1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of the Aggressive Growth Fund's portfolio securities
(excluding short-term investments) amounted to $68,932,455 and $88,008,911,
respectively.
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of common stock of the Funds are summarized below:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
------------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued..................... 4,075 $ 79,695 22,844 $ 554,053
Reinvested................. 447 8,863 2,367 46,829
Redeemed................... (4,854) (95,427) (22,585) (550,667)
------- ---------- ------- ----------
Net increase (decrease)...... (332) $ (6,869) 2,626 $ 50,215
======= ========== ======= ==========
K Shares
Issued..................... 43,896 $ 850,667 16,509 $ 352,493
Reinvested................. 2,035 40,113 1,198 22,851
Redeemed................... (10,487) (207,371) (298) (6,029)
------- ---------- ------- ----------
Net increase................. 35,444 $ 683,409 17,409(a) $ 369,315(a)
======= ========== ======= ==========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
26
<PAGE> 29
<TABLE>
<CAPTION>
BLUE CHIP FUND
------------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued..................... 2,546 $ 67,284 3,838 $ 86,308
Reinvested................. 410 10,906 152 3,409
Redeemed................... (1,010) (26,554) (1,193) (27,364)
------- ---------- ------- ----------
Net increase................. 1,946 $ 51,636 2,797 $ 62,353
======= ========== ======= ==========
K Shares
Issued..................... 70,314 $1,881,745 57,851 $1,458,223
Reinvested................. 5,713 152,121 405 9,313
Redeemed................... (19,927) (541,316) (561) (13,822)
------- ---------- ------- ----------
Net increase................. 56,100 $1,492,550 57,695(a) $1,453,714(a)
======= ========== ======= ==========
SRF Shares(000's) (b)
Issued..................... 13,486 $ 246,713 -- $ --
Reinvested................. -- -- -- --
Redeemed................... (260) (6,441) -- --
------- ---------- ------- ----------
Net increase................. 13,226 $ 240,272 -- $ --
======= ========== ======= ==========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (inception date) to August 31, 1997.
27
<PAGE> 30
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(A) 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR................ $ 19.60 $ 23.49 $ 20.61 $ 25.70 $ 24.68
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (loss)..... (0.13) (0.25) (0.27) (0.22) (0.37)
Net realized and unrealized gains
(losses) on investment
transactions................... 2.87 2.26 8.35 (0.95) 3.02
-------- -------- -------- -------- --------
Total income (loss) from
investment operations............ 2.74 2.01 8.08 (1.17) 2.65
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends to shareholders from
net realized gains on
investment transactions........ (0.95) (5.90) (5.20) (3.92) (1.63)
-------- -------- -------- -------- --------
Net change in net asset value per
share............................ 1.79 (3.89) 2.88 (5.09) 1.02
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD........................... $ 21.39 $ 19.60 $ 23.49 $ 20.61 $ 25.70
======== ======== ======== ======== ========
Total return (excludes sales
charge).......................... 14.45%(e) 9.13% 40.88% (3.59)% 10.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)..................... $ 213 $ 202 $ 180 $ 132 $ 158
Ratio of expenses to average net
assets......................... 1.50%(d) 1.42% 1.51% 1.46% 1.52%
Ratio of net investment income
(loss) to average net assets... (1.27)%(d) (1.26)% 1.35% 1.04% 1.20%
Ratio of expenses to average net
assets*........................ (b) 1.44%** 1.64%** (b) (b)
Ratio of net investment income to
average net assets*............ (b) (b) (b) (b) (b)
Portfolio turnover rate.......... 36% 99% 93% 92% 43%
Average commission rate paid
(c)............................ $ 0.0312 $ 0.0312 $ -- $ -- $ --
</TABLE>
- ---------------
<TABLE>
<S> <C>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such
voluntary fee reductions and/or reimbursements had not occurred, the ratios would have been
as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the Portfolio received
credits from its custodian for interest earned on uninvested balances which were used to
offset custodian fees and expenses. If such credits had not occurred, the expense ratios
would have been as indicated. The ratio of net investment income was not affected.
(a) As of July 22, 1996, the Portfolio designated the existing series of shares as "A" Shares.
(b) There were no waivers or reimbursements during the period.
(c) Represents the dollar amounts of commissions paid on Portfolio transactions divided by the
total number of shares purchased or 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 is not required for prior periods.
(d) Annualized.
(e) Not annualized.
</TABLE>
See Notes to Financial Statements.
28
<PAGE> 31
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(A)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR....... $ 19.53 $ 24.20
-------- --------
Income from Investment Operations:
Net investment (loss)............................ (0.25) (0.06)
Net realized gains on investment transactions.... 2.93 1.29
-------- --------
Total income from investment operations............ 2.68 1.23
-------- --------
Less Dividends and Distributions:
Dividends to shareholders from net realized gains
on investment transactions..................... (0.95) (5.90)
-------- --------
Net change in net asset value per share............ 1.73 (4.67)
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD........... $ 21.26 $ 19.53
======== ========
Total return....................................... 14.13% (c) 5.65% (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)................ $ 1,124 $ 340
Ratio of expenses to average net assets.......... 1.99% (d) 1.95% (d)
Ratio of net investment (loss) to average net
assets......................................... (1.74)%(d) (1.78)%(d)
Ratio of expenses to average net assets*......... 2.24% (d) 2.22% (d)**
Ratio of net investment (loss) to average net
assets*........................................ (1.99)%(d) (2.03)%(d)
Portfolio turnover rate.......................... 36% 99%
Average commission rate paid (b)................. $0.0312 $ 0.0312
</TABLE>
- ---------------
<TABLE>
<S> <C>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the ratios
would have been as indicated.
** During the year ended February 28, 1997, the Portfolio received credits from its
custodian for interest earned on uninvested balances which were used to offset
custodian fees and expenses. If such credits had not the expense ratios would
have been as indicated. The ratio of net investment income was not affected.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Represents the dollar amounts of commissions paid on Portfolio transactions
divided by the total number of shares purchased or 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 is not required
for prior periods.
(c) Not annualized.
(d) Annualized.
</TABLE>
See Notes to Financial Statements.
29
<PAGE> 32
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(A) 1996 1995 1994(B)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR.............................. $ 25.22 $20.53 $15.81 $14.97 $15.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................ 0.08 0.23 0.26 0.31 0.02
Net realized and unrealized gains
(losses) on investment
transactions....................... 3.52 5.21 4.96 0.80 (0.05)
-------- -------- -------- -------- --------
Total income (loss) from investment
operations........................... 3.60 5.44 5.22 1.11 (0.03)
-------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income.................. (0.08) (0.22) (0.28) (0.27) --
Dividends to shareholders from net
realized gains on investment
transactions....................... (1.74) (0.53) (0.22) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions..... (1.82) (0.75) (0.50) (0.27) --
-------- -------- -------- -------- --------
Net change in net asset value per
share................................ 1.78 4.69 4.72 0.84 (0.03)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................... $ 27.00 $25.22 $20.53 $15.81 $14.97
======== ======== ======== ======== ========
Total return (excludes sales
charge).............................. 14.42%++ 27.01% 33.39% 7.60% (0.20)%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)......................... $ 216 $ 153 $ 67 $ 6 $ 1
Ratio of expenses to average net
assets............................. 1.24%+ 1.28% 0.83% 0.00% 0.00%+
Ratio of net investment income (loss)
to average net assets.............. 0.67%+ 0.99% 1.63% 2.46% 2.92%+
Ratio of expenses to average net
assets*............................ 1.33%+ 1.71% 2.28% 6.32% 55.00%+
Ratio of net investment income to
average net assets*................ 0.58%+ 0.56% 0.18% (3.86)% (52.08)%+
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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.
+ Annualized.
++ Not annualized.
(a) As of July 22, 1996, the Fund designated the existing series of shares as "A" Shares.
(b) Period from January 13, 1994 (inception date) to February 28, 1994.
</TABLE>
See Notes to Financial Statements.
30
<PAGE> 33
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(A)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR............... $ 25.20 $20.38
-------- --------
Income from Investment Operations:
Net investment income.................................... 0.04 0.07
Net realized gains/(losses) on investment transactions... 3.47 5.35
-------- --------
Total income from investment operations.................... 3.51 5.42
-------- --------
Less: Dividends and Distributions:
Dividends to shareholders from net investment income..... (0.03) (0.07)
Distributions to shareholders from net realized gains on
investment transactions................................ (1.74) (0.53)
-------- --------
Total Dividends and Distributions.......................... (1.77) (0.60)
-------- --------
Net change in net asset value per share.................... 1.74 4.82
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD................... $ 26.94 $25.20
======== ========
Total return............................................... 14.10%++ 26.96%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................... $ 3 $ 1
Ratio of expenses to average net assets.................. 1.73%+ 1.92%+
Ratio of net investment income to average net assets..... 0.17%+ 0.45%+
Ratio of expenses to average net assets*................. 1.81%+ 2.12%+
Ratio of net investment income to average net assets*.... 0.09%+ 0.25%+
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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.
+ Annualized.
++ Not annualized.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
</TABLE>
See Notes to Financial Statements.
31
<PAGE> 34
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-------------------------- FOR THE PERIOD
JUNE 23, MARCH 1, --------------------------
1997 1997 DECEMBER 6, JANUARY 1,
THROUGH THROUGH YEAR ENDED 1993 1993
AUGUST 31, JUNE 22, ------------------------------------------ THROUGH THROUGH YEAR ENDED
1997 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, DECEMBER 5, DECEMBER 31,
(UNAUDITED) (UNAUDITED) 1997 1996 1995 1994 1993(A) 1992(A)
----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET
VALUE PER
SHARE,
BEGINNING
OF YEAR.... $ 24.02 $ 24.64 $21.09 $17.35 $17.75 $17.34 $ 15.65 $15.17
-------- -------- -------- -------- -------- -------- ------- ------
Income from
Investment
Operations:
Net
investment
income.... 0.04 4.01 0.31 0.31 0.28 0.05 0.29 0.30
Net
realized
and
unrealized
gains
(losses)
on
investment
transactions... 0.08 (0.57) 4.83 5.35 0.88 0.37 1.69 0.48
-------- -------- -------- -------- -------- -------- ------- ------
Total income
from
investment
operations... 0.12 3.44 5.14 5.66 1.16 0.42 1.98 0.78
-------- -------- -------- -------- -------- -------- ------- ------
Less
Dividends
and
Distributions:
Dividends
to
shareholders
from net
investment
income.... -- (4.06) (0.31) (0.31) (0.26) (0.01) (0.29) (0.30)
Distributions
to
shareholders
from net
realized
gains..... -- -- (1.28) (1.61) (1.30) -- -- --
-------- -------- -------- -------- -------- -------- ------- ------
Total
Dividends
and
Distributions.. -- (4.06) (1.59) (1.92) (1.56) (0.01) (0.29) (0.30)
-------- -------- -------- -------- -------- -------- ------- ------
Net change
in net
asset value
per
share...... 0.12 (0.62) 3.55 3.74 (0.40) 0.41 1.69 0.48
-------- -------- -------- -------- -------- -------- ------- ------
NET ASSET
VALUE PER
SHARE, END
OF
PERIOD..... $ 24.14 $ 24.02 $24.64 $21.09 $17.35 $17.75 $ 17.34 $15.65
======== ======== ======== ======== ======== ======== ======= ======
Total
Return..... 14.58%++ 11.64% 27.42% 33.37% 6.95% 2.42%+ 12.74%++ 5.16%
RATIO/SUPPLEMENTAL
DATA:
Net assets,
end of
period
(millions)... $ 319 $ 272 $ 274 $ 206 $ 151 $ 133 $ 123 _ $ 96
Ratio of
expenses
to average
net
assets.... 0.96%+ 0.89% 0.92% 0.95% 0.82% 0.95%+ 0.95%+ 0.95%
Ratio of
net
investment
income to
average
net
assets.... 0.87%+ 1.07% 1.37% 1.53% 1.64% 1.28%+ 1.91%+ 2.08%
Ratio of
expenses
to average
net
assets*... 1.20%+ 1.57% 1.55% 1.54% 1.62% 1.88%* 0.95%+ 0.95%
Ratio of
net
investment
income to
average
net
assets*... 0.63%+ 0.39% 0.74% 0.94% 0.84% 0.35%* 1.91%+ 2.08%
Portfolio
turnover
rate...... 35% N/A N/A N/A N/A N/A 4% 27%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements
had not occurred, the ratios would have been as indicated.
(a) 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.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
32
<PAGE> 35
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COMMON STOCK -- 96.7%
AEROSPACE/DEFENSE -- 2.7%
General Dynamics Corp. ............................................. 28,900 $ 2,301,163
Lockheed Martin Corp. .............................................. 52,700 5,464,331
United Technologies Corp. .......................................... 106,900 8,344,881
------------
16,110,375
------------
AIRLINES -- 0.3%
U.S. Air Group, Inc.** ............................................. 45,800 1,562,925
------------
AUTOMOBILE MANUFACTURERS -- 1.8%
Ford Motor Co. ..................................................... 144,300 6,204,900
General Motors Corp. ............................................... 72,700 4,561,925
------------
10,766,825
------------
AUTOMOBILE PARTS -- 0.6%
Dana Corp. ......................................................... 76,100 3,505,356
------------
BEVERAGES -- 2.9%
Coca-Cola Co. ...................................................... 204,400 11,714,675
PepsiCo, Inc. ...................................................... 166,100 5,979,600
------------
17,694,275
------------
BUILDING RELATED -- 0.4%
Centex Corp. ....................................................... 47,600 2,588,250
------------
CHEMICALS -- 3.0%
Air Products & Chemicals, Inc. ..................................... 61,600 5,024,250
DuPont, (E.I.) de Nemours & Co. .................................... 202,600 12,624,512
------------
17,648,762
------------
CLOTHING & APPAREL -- 0.5%
VF Corp. ........................................................... 34,100 3,013,587
------------
COMPUTER HARDWARE -- 5.3%
Compaq Computer Corp.** ............................................ 169,750 11,118,625
Dell Computer Corp.** .............................................. 110,400 9,059,700
International Business Machines Corp. .............................. 64,000 6,456,000
Sun Microsystems, Inc.** ........................................... 105,200 5,049,600
------------
31,683,925
------------
COMPUTER SERVICES & SOFTWARE -- 3.8%
Microsoft Corp.** .................................................. 136,600 18,056,813
Oracle Corp.** ..................................................... 121,650 4,637,906
------------
22,694,719
------------
CONSUMER PRODUCTS & SERVICES -- 3.7%
Avon Products, Inc. ................................................ 92,000 5,893,750
Philip Morris Cos., Inc. ........................................... 241,800 10,548,525
Texas Instruments, Inc. ............................................ 51,200 5,817,600
------------
22,259,875
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 2.7%
General Electric Co. ............................................... 260,200 16,262,500
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
33
<PAGE> 36
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
ENTERTAINMENT & LEISURE -- 1.9%
Hasbro, Inc. ....................................................... 103,450 $ 2,780,219
King World Productions, Inc. ....................................... 55,600 2,210,100
Walt Disney Co. .................................................... 81,478 6,258,529
------------
11,248,848
------------
FINANCIAL -- BANK & TRUST -- 9.3%
Barnett Banks, Inc. ................................................ 113,100 7,704,937
Bankers Trust New York Corp. ....................................... 49,300 5,114,875
Chase Manhattan Corp. .............................................. 36,000 4,002,750
Citicorp ........................................................... 38,200 4,875,275
Comerica, Inc. ..................................................... 51,500 3,646,844
First Union Corp. .................................................. 178,600 8,583,962
Fleet Financial Group, Inc. ........................................ 98,900 6,372,869
Mellon Bank Corp. .................................................. 141,200 6,795,250
NationsBank Corp. .................................................. 64,900 3,853,437
State Street Corp. ................................................. 88,600 4,418,925
------------
55,369,124
------------
FINANCIAL SERVICES -- 1.4%
Morgan Stanley Dean Witter Discover & Co. .......................... 173,200 8,335,250
------------
FOOD -- 3.4%
American Stores Co. ................................................ 219,300 5,194,669
Conagra, Inc. ...................................................... 85,600 5,505,150
Hershey Foods Corp. ................................................ 62,300 3,325,262
Kellogg Co. ........................................................ 37,200 1,664,700
Sara Lee Corp. ..................................................... 112,400 4,524,100
------------
20,213,881
------------
HEALTHCARE SERVICES -- 1.0%
Tenet Healthcare Corp.** ........................................... 218,200 5,945,950
------------
HOUSEHOLD PRODUCTS -- 2.6%
Clorox Co. ......................................................... 37,000 4,856,250
Procter & Gamble Co. ............................................... 80,700 10,738,144
------------
15,594,394
------------
HOTELS & MOTELS -- 0.6%
Marriott Corp.** ................................................... 54,700 3,640,969
------------
INSURANCE -- 4.8%
Allstate Corp. ..................................................... 70,197 5,128,768
CIGNA Corp. ........................................................ 38,600 7,078,275
Conseco, Inc. ...................................................... 138,900 5,972,700
General Re Corp. ................................................... 19,200 3,722,400
Travelers Group, Inc. .............................................. 104,100 6,610,350
------------
28,512,493
------------
MACHINERY & EQUIPMENT -- 1.7%
Caterpillar, Inc. .................................................. 67,000 3,890,188
Ingersoll Rand Co. ................................................. 48,200 2,898,025
Parker Hannifin Corp. .............................................. 48,200 3,099,863
------------
9,888,076
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.7%
Abbot Laboratories ................................................. 66,800 4,003,825
Johnson & Johnson Co. .............................................. 165,800 9,398,787
U.S. Surgical Corp. ................................................ 77,800 2,562,538
------------
15,965,150
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
34
<PAGE> 37
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
METALS & MINING -- 1.3%
Phelps Dodge Corp. ................................................. 54,800 $ 4,407,975
USX -- U.S. Steel Group, Inc. ...................................... 93,800 3,294,725
------------
7,702,700
------------
MULTI-INDUSTRY -- 2.3%
Dover Corp. ........................................................ 59,600 4,116,125
Tyco International Ltd. ............................................ 117,500 9,216,406
------------
13,332,531
------------
OIL (DOMESTIC) -- 1.8%
Phillips Petroleum Co. ............................................. 110,600 5,260,413
USX -- Marathon Group .............................................. 170,400 5,548,650
------------
10,809,063
------------
OIL (INTERNATIONAL) -- 5.8%
Chevron Corp. ...................................................... 109,100 8,448,431
Exxon Corp. ........................................................ 201,100 12,304,806
Mobil Corp. ........................................................ 102,900 7,485,975
Royal Dutch Petroleum Co. .......................................... 116,400 5,907,300
------------
34,146,512
------------
OIL & GAS -- 1.2%
Schlumberger, Ltd. ................................................. 96,000 7,314,000
------------
PAPER & FOREST PRODUCTS -- 1.1%
James River Corp. of Virginia** .................................... 110,500 4,641,000
Weyerhaeuser Co. ................................................... 36,400 2,102,100
------------
6,743,100
------------
PHARMACEUTICALS -- 6.6%
Bristol-Meyers ..................................................... 113,800 8,648,800
Lilly, (Eli) & Co. ................................................. 57,100 5,974,088
Merck & Co., Inc. .................................................. 142,400 13,074,100
Schering-Plough Corp. .............................................. 161,700 7,761,600
Warner-Lambert Co. ................................................. 31,300 3,977,056
------------
39,435,644
------------
PRINTING & PUBLISHING -- 0.9%
McGraw-Hill Cos., Inc. ............................................. 43,400 2,660,963
New York Times Co. ................................................. 52,700 2,490,075
------------
5,151,038
------------
SEMI-CONDUCTORS -- 2.6%
Applied Materials, Inc.** .......................................... 43,600 4,114,750
Motorola, Inc. ..................................................... 150,300 11,028,262
------------
15,143,012
------------
RAILROADS -- 1.0%
Burlington Northern Santa Fe ....................................... 61,700 5,657,119
------------
RETAIL & MERCHANDISING -- 4.0%
CUC International, Inc. ............................................ 194,100 4,561,350
Dayton Hudson Corp. ................................................ 47,400 2,701,800
Home Depot, Inc. ................................................... 208,900 9,857,469
TJX Companies, Inc. ................................................ 233,000 6,407,500
------------
23,528,119
------------
TELECOMMUNICATIONS -- 2.5%
3Com Corp.** ....................................................... 91,400 4,564,288
Lucent Technologies, Inc. .......................................... 66,000 5,139,750
Tellabs, Inc.** .................................................... 86,000 5,133,125
------------
14,837,163
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
35
<PAGE> 38
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
UTILITIES -- GAS -- 0.7%
Pacific Enterprises ................................................ 116,900 $ 3,850,394
------------
UTILITIES -- ELECTRIC -- 2.3%
FPL Group, Inc. .................................................... 147,300 6,849,450
GPU, Inc. .......................................................... 200,300 6,735,087
------------
13,584,537
------------
UTILITIES -- TELEPHONE -- 5.5%
Ameritech Corp. .................................................... 110,400 6,920,700
Bell Atlanta Corp. ................................................. 105,522 7,637,126
BellSouth Corp. .................................................... 176,300 7,757,200
U.S. WEST Communications Group ..................................... 106,000 3,796,125
WorldCom, Inc.** ................................................... 210,300 6,295,856
------------
32,407,007
------------
TOTAL COMMON STOCK (COST $465,960,052) .............................. 574,147,448
------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
---- -------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
U.S. Treasury Bill (Cost $995,248)............. 5.31% 10/02/97 $1,000,000 995,248
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 3.0%
Temporary Investment Fund (Cost $17,766,052) ........................ 17,766,052 17,766,052
------------
TOTAL INVESTMENTS -- 99.8% (COST $484,721,532)(A)................................. 592,908,748
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%..................................... 920,282
------------
NET ASSETS -- 100.0%.............................................................. $593,829,030
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $593,829,030.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................ $111,454,572
Unrealized depreciation................................ (3,267,356)
------------
Net unrealized appreciation............................ $108,187,216
============
</TABLE>
* Effective Yield.
** Non-income producing security.
Schedule of Open Financial Futures Contracts Purchased
<TABLE>
<CAPTION>
NET UNREALIZED
EXPIRATION NUMBER OF CONTRACT APPRECIATION
DATE CONTRACTS CONTRACTS VALUE OF CONTRACTS
- ---------- --------- ------------------------ ----------- --------------
<S> <C> <C> <C> <C>
9/19/97 30 S&P 500 -- September 1997 $13,546,500 $ 49,500
========
</TABLE>
See Notes to Financial Statements.
36
<PAGE> 39
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $484,721,532).............. $592,908,748
Dividend Receivable................................................. 1,014,093
Interest Receivable................................................. 72,165
Contribution receivable............................................. 1,439,225
Variation margin receivable on futures contract..................... 49,500
Deferred organization costs......................................... 17,313
Prepaid expenses.................................................... 48,594
------------
Total Assets.......................................................... 595,549,638
------------
LIABILITIES
Withdrawal payable.................................................. 1,142,882
Advisory fees payable............................................... 256,754
Administration fees payable......................................... 25,676
Audit fees payable.................................................. 26,732
Fund accounting fees and expense payable............................ 46,817
Custodian fees payable.............................................. 3,795
Legal fees payable.................................................. 15,914
Other accrued expenses.............................................. 202,038
------------
Total Liabilities..................................................... 1,720,608
------------
NET ASSETS............................................................ $593,829,030
============
</TABLE>
- ---------------
See Notes to Financial Statements.
37
<PAGE> 40
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income...................................................... $ 4,613,845
Interest income...................................................... 429,249
-----------
Total income....................................................... 5,043,094
-----------
EXPENSES
Advisory fees........................................................ 1,754,959
Administration fees.................................................. 136,084
Fund accounting fees and expenses.................................... 140,530
Audit fees........................................................... 12,735
Custodian fees and expenses.......................................... 35,526
Legal fees........................................................... 22,373
Trustees' fees....................................................... 12,703
Amortization of organization costs................................... 6,992
Other expenses....................................................... 8,063
-----------
Total Expenses..................................................... 2,129,965
Less: Fee waivers and expense reimbursements......................... (279,642)
-----------
Total Net Expenses................................................... 1,850,323
-----------
Net Investment Income.................................................. 3,192,771
-----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions........................ 34,879,065
Net change in unrealized appreciation on investments and futures..... 35,352,626
-----------
Net realized/unrealized gains on investments and futures............... 70,231,691
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $73,424,462
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
38
<PAGE> 41
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Operations:
Net investment income.................................. $ 3,192,771 $ 5,845,867
Net realized gains on investment transactions.......... 34,879,065 62,491,398
Net change in unrealized appreciation on investments... 35,352,626 26,358,970
------------ ------------
Change in net assets resulting from operations......... 73,424,462 94,696,235
------------ ------------
Trust Share Transactions:
Contributions.......................................... 100,389,612 176,422,520
Withdrawals............................................ (56,551,614) (70,074,459)
------------ ------------
Change in net assets from trust share transactions....... 43,837,998 106,348,061
------------ ------------
Change in net assets..................................... 117,262,460 201,044,296
NET ASSETS
Beginning of Period.................................... 476,566,570 275,522,274
------------ ------------
End of Period.......................................... $593,829,030 $476,566,570
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
39
<PAGE> 42
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
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, 1997, the Trust
consisted of two portfolios. The accompanying financial statements and notes are
those of the Blue Chip Portfolio (the "Portfolio") only.
The investment objective of the Portfolio is long term capital appreciation
through investments in blue chip stocks.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, served as the Portfolio's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly owned subsidiary,
BISYS Fund Services, Limited Partnership serves as the Portfolio's
administrator. Effective September 15, 1997, PFPC Inc., wholly owned subsidiary
of PNC Bank Corp., serves as administrator for the Trust.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
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 securities exchange on which such securities
are primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. 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
40
<PAGE> 43
amortized cost, which approximates market value.
FUTURES:
A futures contract is an agreement to purchase or sell a specified quantity
of an underlying instrument at a specified future date or to make or receive a
cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Upon entering into such a contract the Portfolio is required to pledge
to the broker an amount of cash and/or securities equal to the minimum "initial
margin" requirements of the exchange. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time when it was closed. The Portfolio invests
in futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest rates. The
use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets, and the possible inability of counterparties to meet the terms of
their contracts. The summary of open financial futures contracts at August 31,
1997 is included in the Portfolio's Schedule of Investments which is included
elsewhere in this report.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recorded on the ex-dividend date. Realized gains and
losses on securities transactions are determined on the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
FEDERAL INCOME TAXES:
The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
Portfolio will be managed in such a way that an investor will be able to satisfy
the requirements of the Internal Revenue Code applicable to regulated investment
companies.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has an Investment Advisory Agreement with Bank of
41
<PAGE> 44
America and an Administration Agreement with BISYS.
As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, which is accrued daily and
payable monthly, at an annual rate of 0.75% from March 1, 1997 through June 22,
1997, and 0.50% from June 23, 1997 through August 31, 1997 of the average daily
net assets of the Portfolio. For the six months ended August 31, 1997, Bank of
America waived $262,519 in fees as Adviser of the Portfolio.
As Administrator, BISYS assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, BISYS is
entitled to a fee which is accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the six months ended
August 31, 1997, BISYS waived $17,123 in fees as Administrator of the Portfolio.
For services provided to all three of the portfolios constituting the Trust,
each Trustee receives an annual fee of $3,000 and a meeting fee of $500.
For the six months ended August 31, 1997, the Portfolio incurred legal
expenses of $22,373, which were earned by a law firm, a partner of which serves
as Secretary of the Trust.
Certain officers of the Trust are affiliated with BISYS. Such persons are
not paid directly by the Trust for serving in these capacities.
NOTE 4 -- SECURITIES TRANSACTIONS
During the six months ended August 31, 1997, the Portfolio purchased and
sold portfolio securities, excluding short-term securities, in the following
amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Total Common
Stocks $230,612,694 $181,509,424
</TABLE>
42
<PAGE> 45
MASTER INVESTMENT TRUST SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994*
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net
assets............................... 0.75%** 0.62% 0.31% 0.17% 0.27%**
Ratio of net investment income to
average net assets................... 1.30%** 1.62% 2.16% 2.30% 1.97%**
Ratio of expenses to average net
assets(a)............................ 0.87%** 0.90% 0.90% 0.97% 1.07%**
Ratio of net investment income to
average net assets(a)................ 1.19%** 1.34% 1.57% 1.50% 1.17%**
Portfolio Turnover.................... 35% 91% 108% 44% 86%
Average Commission rate paid(b)....... $0.0506 $ 0.0530 -- -- --
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(b) 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.
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.
** Annualized.
43
<PAGE> 46
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 47
----------------
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
----------------
[PACIFIC HORIZON FUNDS LOGO]
Provident Distributor, Inc., Distributor
GRW-0069 10/97
<PAGE> 48
PACIFIC HORIZON GROWTH & INCOME FUNDS
SEMI-ANNUAL REPORT
August 31, 1997
Capital Income Fund
Asset Allocation Fund
Investing For All
The Times Of Your Life
NOT FDIC INSURED
PACIFIC HORIZON GROWTH & INCOME FUNDS
<PAGE> 49
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 50
CONTENTS
<TABLE>
. <S> <C>
. FUND FACTS 2-3
.
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
.
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
.
. PACIFIC HORIZON CAPITAL INCOME FUND
. Portfolio of Investments 10-13
. Statement of Assets
. and Liabilities 14
. Statement of Operations 15
. Statements of Changes
. in Net Assets 16
.
. PACIFIC HORIZON ASSET ALLOCATION
. FUND
. Portfolio of Investments 17-23
. Statement of Assets
. and Liabilities 24
. Statement of Operations 25
. Statements of Changes
. in Net Assets 26
.
. NOTES TO FINANCIAL STATEMENTS 27-34
.
. FINANCIAL HIGHLIGHTS 35-40
</TABLE>
<PAGE> 51
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 52
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 53
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 54
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 55
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 56
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 57
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 58
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 59
PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCK -- 8.3%
CONSUMER STAPLES -- 0.9%
Colgate-Palmolive Company......................................... 54,000 $ 3,388,500
------------
FINANCE -- 3.1%
Barnett Banks, Inc. .............................................. 66,000 4,496,250
Fifth Third Bancorp............................................... 66,000 3,861,000
Wells Fargo & Co. ................................................ 13,000 3,305,250
------------
11,662,500
------------
HEALTH CARE -- 4.3%
American Home Products Corp. ..................................... 34,000 2,448,000
Bristol-Myers Squibb Co. ......................................... 44,000 3,344,000
Schering Plough................................................... 84,000 4,032,000
Warner Lambert Co. ............................................... 52,000 6,607,250
------------
16,431,250
------------
TOTAL COMMON STOCK
(COST $26,522,196)................................................ 31,482,250
------------
CONVERTIBLE PREFERRED STOCK -- 28.6%
BASICS -- 4.1%
AMAX Gold, Inc., Series B, $3.75.................................. 40,000,000 2,140,000
Cyprus AMAX Minerals, $4.00....................................... 19,950,000 1,079,794
Freeport-Mcmoran, Inc., $1.75..................................... 125,000,000 3,406,250
International Paper Co., $5.25.................................... 85,000,000 4,749,375
Timet Capital, Trust I, $3.31..................................... 70,000,000 3,990,000
------------
15,365,419
------------
CAPITAL GOODS -- 3.6%
Corning Delaware, $3.00........................................... 40,000,000 3,320,000
Elsag Bailey Corp., $2.75......................................... 108,000,000 4,941,000
McDermott, Inc., Series A, $2.20.................................. 20,000,000 685,000
McDermott International, Inc., Series C, 144A, $1.44.............. 87,000,000 4,556,625
------------
13,502,625
------------
CONSUMER CYCLICALS -- 1.8%
Kmart Financing, Inc., $3.88...................................... 48,875,000 2,880,570
Owens Corning Capital 144A, $3.25................................. 72,000,000 4,023,000
------------
6,903,570
------------
CONSUMER STAPLES -- 2.0%
Ajl Peps Trust, $1.44............................................. 240,000,000 3,660,000
Ralston Purina Co., $4.34......................................... 650,000,000 3,871,563
------------
7,531,563
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 60
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
ENERGY -- 2.8%
MCN Corp., $2.01.................................................. 112,500,000 $ 3,227,344
Occidental Petroleum Corp., $3.00................................. 40,000,000 3,605,000
Unocal Corp., $3.13............................................... 66,960,000 3,875,310
------------
10,707,654
------------
FINANCE -- 7.4%
Ahmanson (H.F.), Series D, $3.00.................................. 40,000,000 4,245,000
American Bankers Insurance Group, Inc., $3.13..................... 58,000,000 4,364,500
Frontier Insurance Group, Inc., $3.13............................. 5,000,000 406,250
Frontier Insurance Group, Inc., 144A, $3.13....................... 50,000,000 4,062,500
Golden State Bancorp, Series A, $2.19............................. 60,000,000 4,200,000
Penncorp Financial 144A*, $3.50................................... 50,000,000 3,031,250
Sovereign Bancorp, Series B, $3.13................................ 45,000,000 4,241,250
St. Paul Capital Corp. ........................................... 50,000,000 3,375,000
------------
27,925,750
------------
HEALTH CARE -- 1.0%
Aetna, Inc., Class C, $4.76....................................... 42,000,000 3,696,000
------------
TECHNOLOGY -- 1.8%
Loral Space and Communications, 144A*, $3.00...................... 46,000,000 2,512,750
Microsoft Corp., Series A, $2.20.................................. 50,000,000 4,350,000
------------
6,862,750
------------
TRANSPORTATION -- 0.5%
CNF Transportation, Inc., $2.50................................... 30,500,000 1,769,000
------------
UTILITIES -- 3.6%
Airtouch Communications, Class C, $2.13........................... 60,000,000 3,281,250
CalEnergy Capital Trust, 144A, $3.13.............................. 70,000,000 3,508,750
Citizens Utilities Trust, $2.50................................... 75,000,000 3,346,875
Sprint Corp., $2.63............................................... 101,000,000 3,598,125
------------
13,735,000
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(COST $92,503,964)................................................ 107,999,331
------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
----- -------- -----------
<S> <C> <C> <C> <C>
CONVERTIBLE BONDS -- 59.2%
BASICS -- 0.4%
Agnico Eagle Mines Ltd ..................... 3.50% 01/27/04 $ 2,000,000 1,577,500
------------
CAPITAL GOODS -- 3.8%
Thermo Electron Corp. 144A.................. 4.25% 01/01/03 3,300,000 3,951,750
United Waste Systems, 144A*................. 4.50% 06/01/01 1,900,000 2,804,875
U.S. Filter Corp ........................... 4.50% 12/15/01 3,500,000 3,920,000
U.S. Waste Services, Inc ................... 4.00% 02/01/02 3,125,000 3,558,594
------------
14,235,219
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 61
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- --------------------------------------------- ------ -------- ----------- ------------
<S> <C> <C> <C> <C>
CONSUMER CYCLICALS -- 13.7%
CUC International, Inc. 144A*............... 3.00% 02/15/02 $ 5,000,000 $ 5,062,500
Hilton Hotels............................... 5.00% 05/15/06 2,780,000 3,169,200
Home Depot, Inc ............................ 3.25% 10/01/01 4,100,000 4,786,750
Magna International, Inc ................... 5.00% 10/15/02 2,800,000 3,521,000
Marriott International +.................... 0.00% 03/25/11 5,700,000 3,591,000
Nine West Group, Inc. 144A.................. 5.50% 07/15/03 4,400,000 4,240,500
Pep Boys, Inc. +............................ 0.00% 09/20/11 6,300,000 3,299,625
Personnel Group 144A*....................... 5.75% 07/01/04 3,500,000 3,994,375
Pier 1 Imports, Inc ........................ 5.75% 10/01/03 2,160,000 3,269,700
Protection One Alarm Monitoring............. 6.75% 09/15/03 5,155,000 5,960,469
Saks Holdings, Inc ......................... 5.50% 09/15/06 4,500,000 3,988,125
Times Mirror Co. 144A* +.................... 0.00% 04/15/17 7,200,000 2,790,000
Tower Automotive, Inc. 144A................. 5.00% 08/01/04 4,000,000 4,305,000
------------
51,978,244
------------
CONSUMER STAPLES -- 0.6%
Boston Chicken, Inc ........................ 7.75% 05/01/04 2,710,000 2,330,600
------------
ENERGY -- 10.3%
Baker Hughes, Inc. +........................ 0.00% 05/05/08 4,100,000 3,423,500
Diamond Offshore Drilling, Inc ............. 3.75% 02/15/07 3,000,000 4,372,500
Key Energy Group 144A*...................... 7.50% 07/01/03 1,600,000 4,298,000
Nabors Industries, Inc ..................... 5.00% 05/15/06 2,000,000 4,025,000
Parker Drilling Corp ....................... 5.50% 08/01/04 3,395,000 3,726,012
Pennzoil Co ................................ 4.75% 10/01/03 2,700,000 3,564,000
Pride Petroleum Services, Inc .............. 6.25% 02/15/06 1,700,000 4,458,250
Seacor Holdings, Inc ....................... 5.38% 11/15/06 600,000 648,750
Seacor Holdings, Inc. 144A*................. 5.38% 11/15/06 2,700,000 2,919,375
Swift Energy Co ............................ 6.25% 11/15/06 3,750,000 3,975,000
Valhi, Inc. +............................... 0.00% 10/20/07 5,900,000 3,562,125
------------
38,972,512
------------
FINANCE -- 4.9%
Berkshire Hathaway, Inc .................... 1.00% 12/02/01 3,200,000 3,544,000
Nac Re Corp. 144A........................... 5.25% 12/15/02 3,810,000 4,214,812
Penn Treaty America Corp ................... 6.25% 12/01/03 890,000 1,160,337
Penn Treaty American Corp .................. 6.25% 12/01/03 3,065,000 3,995,994
USF & G Corp. +............................. 0.00% 03/03/09 3,500,000 2,397,500
Westbridge.................................. 7.50% 05/01/04 3,285,000 3,001,669
------------
18,314,312
------------
HEALTH CARE -- 6.8%
Alza Corp .................................. 5.00% 05/01/06 2,800,000 2,856,000
Alza Corp. +................................ 0.00% 07/14/14 7,900,000 3,525,375
Dura Pharmaceuticals, Inc .................. 3.50% 07/15/02 4,200,000 4,089,750
NCS Healthcare, Inc. 144A................... 5.75% 08/15/04 4,010,000 4,070,150
Phycor, Inc ................................ 4.50% 02/15/03 3,000,000 3,000,000
Roche Holdings, Inc. Notes 144A +........... 0.00% 04/20/10 3,000,000 1,455,000
Roche Holdings, Inc. Notes 144A +........... 0.00% 05/06/12 8,000,000 3,400,000
Tenet Healthcare Corp ...................... 6.00% 12/01/05 2,800,000 3,360,000
------------
25,756,275
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 62
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- --------------------------------------------- ----- -------- ----------- ------------
<S> <C> <C> <C> <C>
HEALTHCARE SERVICES -- 4.3%
Alternative Living.......................... 7.00% 06/01/04 $ 3,655,000 $ 4,609,869
Arv Assisted Living......................... 6.75% 04/01/06 4,765,000 4,282,544
FPA Medical Management 144A*................ 6.50% 12/15/01 3,650,000 4,799,750
Sunrise Assisted Living Inc ................ 5.50% 06/15/02 2,430,000 2,651,737
------------
16,343,900
------------
TECHNOLOGY -- 12.2%
Adaptec, Inc. 144A*......................... 4.75% 02/01/04 3,275,000 3,835,844
Adaptec, Inc ............................... 4.75% 02/01/04 500,000 585,625
Analog Devices, Inc ........................ 3.50% 12/01/00 2,100,000 3,449,250
Atmel Corp ................................. 3.25% 06/01/02 3,600,000 4,374,000
EMC Corp. 144A*............................. 3.25% 03/15/02 3,000,000 3,885,000
Itron, Inc. 144A*........................... 6.75% 03/31/04 3,000,000 3,641,250
Motorola +.................................. 0.00% 09/27/13 3,350,000 2,881,000
Park Electrochemical Corp .................. 5.50% 03/01/06 3,900,000 3,705,000
Photronics Inc ............................. 6.00% 06/01/04 2,600,000 3,344,250
Reptron Electronics, Inc ................... 6.75% 08/01/04 4,000,000 4,205,000
S3, Inc .................................... 5.75% 10/01/03 4,080,000 4,345,200
Solectron Corp. 144A........................ 6.00% 03/01/06 3,000,000 4,215,000
Xilinx, Inc ................................ 5.25% 11/01/02 3,000,000 3,506,250
------------
45,972,669
------------
UTILITIES -- 1.4%
Carematrix Corp. 144A....................... 6.25% 08/15/04 4,200,000 3,948,000
Corestaff Inc .............................. 2.94% 08/15/04 1,600,000 1,434,000
------------
5,382,000
------------
TRANSPORTATION -- 0.8%
Alaska Air Group, Inc ...................... 6.88% 06/15/14 2,800,000 2,845,500
------------
TOTAL CONVERTIBLE BONDS
(COST $196,913,672)......................... 223,708,731
------------
TOTAL INVESTMENTS -- 96.1%
(COST $315,939,832) (A)..................... 363,190,312
OTHER ASSETS IN EXCESS OF LIABILITIES --
3.9%........................................ 14,833,610
------------
NET ASSETS -- 100.0%......................... $378,023,922
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $378,023,922.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $52,104,075
Unrealized depreciation................................. (4,853,595)
-----------
Net unrealized appreciation............................. $47,250,480
===========
</TABLE>
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 13.2% of net assets.
+ Zero Coupon Bond.
* 144A Security registration under the Securities Act of 1933 will occur for
this security upon sale of this security.
See Notes to Financial Statements.
13
<PAGE> 63
PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $315,939,832).......................... $363,190,312
Cash............................................................................. 7,458,234
Interest and dividends receivable................................................ 2,819,875
Receivable for capital shares sold............................................... 1,164,251
Receivable for investment securities sold........................................ 4,286,155
Prepaid expenses................................................................. 12,668
------------
Total Assets...................................................................... 378,931,495
------------
LIABILITIES:
Payable for capital shares redeemed.............................................. 462,089
Investment advisory fees payable................................................. 144,060
Administration fees payable...................................................... 64,027
Shareholder service fees payable (A and K Shares)................................ 80,033
12b-1 fees payable (K Shares).................................................... 725
Transfer agent fees payable...................................................... 126,164
Legal fees payable............................................................... 7,684
Other accrued expenses........................................................... 22,791
------------
Total Liabilities................................................................. 907,573
------------
NET ASSETS........................................................................ $378,023,922
============
Net Assets:
A Shares......................................................................... $376,236,520
K Shares......................................................................... 1,787,402
------------
Total............................................................................. $378,023,922
============
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares......................................................................... 20,026,289
K Shares......................................................................... 95,574
------------
Total............................................................................. 20,121,863
============
NET ASSET VALUE
A Shares -- redemption price per share........................................... $ 18.79
============
Maximum Sales Charge (A Shares).................................................. 4.50%
Maximum Offering Price per share (A Shares) (Net Asset Value of A Shares /
(100%-Maximum Sales Charge))................................................... $ 19.68
============
K Shares -- offering and redemption price per share.............................. $ 18.70
============
COMPOSITION OF NET ASSETS:
Shares of common stock, at par................................................... $ 20,122
Additional paid-in capital....................................................... 306,612,834
Accumulated undistributed net investment income.................................. 2,125,005
Accumulated net realized gains on investment transactions........................ 22,015,481
Net unrealized appreciation on investments....................................... 47,250,480
------------
NET ASSETS, AUGUST 31, 1997....................................................... $378,023,922
============
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 64
PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................... $ 3,464,839
Interest............................................................ 4,293,329
-----------
Total Income.......................................................... 7,758,168
-----------
EXPENSES:
Investment advisory fees............................................ 767,541
Administration fees................................................. 341,131
Shareholder service fees (A Shares)................................. 424,670
Shareholder service fees (K Shares)................................. 1,740
12b-1 fees (K Shares)............................................... 5,220
Transfer Agent fees................................................. 231,892
Legal fees.......................................................... 13,056
Other expenses...................................................... 135,982
-----------
Total Expenses.................................................... 1,921,232
Less: Fee waivers..................................................... (1,740)
-----------
Total Net Expenses.................................................... 1,919,492
-----------
NET INVESTMENT INCOME................................................. 5,838,676
-----------
NET REALIZED / UNREALIZED GAINS ON INVESTMENTS:
Net realized gain on investment transactions........................ 22,053,383
Net change in unrealized appreciation on............................ 27,661,794
-----------
Net realized / unrealized gains on investments........................ 49,715,177
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $55,553,853
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 65
PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss)......................... $ 5,838,676 $ 9,227,095
Net realized gains on investment transactions........ 22,053,383 48,284,940
Net change in unrealized appreciation on
investments........................................ 27,661,794 (10,670,170)
------------ ------------
Change in net assets resulting from operations....... 55,553,853 46,841,865
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares........................................... (5,590,401) (9,043,759)
K Shares........................................... (20,700) (2,046) (a)
Net realized gains from investment transactions:
A Shares........................................... (22,013,760) (22,450,057)
K Shares........................................... (92,640) (15,970) (a)
------------ ------------
Change in net assets from shareholder distributions.... (27,717,501) (31,511,832)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.......................... 49,457,279 76,079,488
Dividends reinvested................................. 25,978,116 30,042,288
Cost of shares redeemed.............................. (35,608,285) (57,837,148)
------------ ------------
Change in net assets from capital share transactions... 39,827,110 48,284,628
------------ ------------
Change in net assets................................... 67,663,462 63,614,661
NET ASSETS
Beginning of Period.................................. 310,360,460 246,745,799
------------ ------------
End of Period (including undistributed net investment
income of $2,125,005 and $1,897,430,
respectively.)..................................... $378,023,922 $310,360,460
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
16
<PAGE> 66
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- 57.5%
AEROSPACE/AIRLINES -- 0.9%
AMR Corporation**................................................. 4,800 $ 483,600
Boeing Co......................................................... 29,700 1,616,794
------------
2,100,394
------------
ALUMINUM -- 0.3%
Aluminum Company of America....................................... 7,500 616,875
------------
AUTOMOBILES -- 0.8%
Ford Motor Co. ................................................... 20,900 898,700
General Motors Corp. ............................................. 16,600 1,041,650
------------
1,940,350
------------
BANKS -- 3.8%
Banc One Corp. ................................................... 45,400 2,434,575
Chase Manhattan Corp. ............................................ 16,900 1,879,069
Citicorp.......................................................... 14,300 1,825,037
U.S.Bancorp....................................................... 10,192 892,437
Wells Fargo & Co. ................................................ 6,400 1,627,200
------------
8,658,318
------------
BEVERAGES -- 1.0%
Coca-Cola Co. .................................................... 39,600 2,269,575
------------
BUILDING MATERIALS -- 0.3%
Masco Corp ....................................................... 15,700 697,669
------------
CHEMICALS -- 1.6%
E.I. Du Pont De Nemours & Co. .................................... 20,200 1,258,712
Monsanto Corp. ................................................... 34,700 1,524,631
Praxair, Inc. .................................................... 15,800 844,312
------------
3,627,655
------------
COMPUTER SOFTWARE/HARDWARE -- 3.0%
IBM............................................................... 13,800 1,392,075
Microsoft Corp. .................................................. 31,400 4,150,688
Seagate Technology, Inc.**........................................ 34,700 1,325,106
------------
6,867,869
------------
CONTAINERS & PACKAGING -- 0.2%
Bemis Co., Inc. .................................................. 9,300 408,619
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
17
<PAGE> 67
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
COSMETICS/HOUSEHOLD PRODUCTS -- 2.1%
Colgate-Palmolive Co. ............................................ 7,600 $ 476,900
Gillette Co. ..................................................... 16,000 1,325,000
Newell Co. ....................................................... 19,600 771,750
Procter & Gamble Co. ............................................. 16,000 2,129,000
------------
4,702,650
------------
ELECTRONIC PRODUCTS -- 2.2%
General Electric Co. ............................................. 79,200 4,950,000
------------
ELECTRONIC SEMICONDUCTORS -- 2.6%
Intel Corp. ...................................................... 49,400 4,550,975
National Semiconductor Corp.**.................................... 41,900 1,435,075
------------
5,986,050
------------
FINANCIAL SERVICES -- 4.4%
American Express.................................................. 25,700 1,998,175
First Data Corp. ................................................. 57,500 2,361,094
Household International, Inc. .................................... 23,900 2,651,406
Morgan Stanley Group, Inc. ....................................... 63,600 3,060,750
------------
10,071,425
------------
FOOD -- 2.1%
Archer Daniels Midland Co......................................... 40,845 883,273
Kellogg Co. ...................................................... 19,600 877,100
Pioneer Hi-Bred International, Inc. .............................. 8,900 762,619
Ralston Purina Group.............................................. 9,800 882,000
Sara Lee Corp. ................................................... 20,300 817,075
W.M. Wrigley Jr., Co. ............................................ 7,400 536,500
------------
4,758,567
------------
GAS UTILITIES -- 0.8%
Columbia Gas System, Inc. ........................................ 27,400 1,808,400
------------
HOSPITAL CARE -- 0.7%
Abbott Laboratories............................................... 8,800 527,450
Becton Dickinson & Co. ........................................... 11,500 551,281
Johnson & Johnson Co. ............................................ 8,600 487,512
------------
1,566,243
------------
HOTELS & MOTELS -- 0.8%
HFS, Inc.**....................................................... 24,200 1,347,637
ITT Corp.**....................................................... 8,200 515,062
------------
1,862,699
------------
INSURANCE-PROPERTY & CASUALTY -- 1.0%
American International Group, Inc................................. 6,900 651,187
Chubb Corp. ...................................................... 23,800 1,591,625
------------
2,242,812
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
18
<PAGE> 68
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
LEISURE -- 0.7%
Disney (Walt) Co.................................................. 12,400 $ 952,475
Hilton Hotels Corp. .............................................. 10,700 328,356
Mattel, Inc. ..................................................... 9,300 310,969
------------
1,591,800
------------
MANUFACTURING-MACHINERY -- 1.2%
General Signal Corp. ............................................. 29,400 1,275,225
Illinois Tool Works, Inc. ........................................ 29,300 1,417,387
------------
2,692,612
------------
MEDIA -- 0.9%
ACNielsen Corp.**................................................. 1 23
Gannett, Inc. .................................................... 3,200 311,800
McGraw Hill Companies............................................. 5,900 361,744
Time Warner, Inc. ................................................ 13,000 669,500
Tribune Co. ...................................................... 13,000 642,687
------------
1,985,754
------------
MEDICAL SUPPLIES & EQUIPMENT -- 0.7%
Boston Scientific Corp.**......................................... 3,700 260,850
Guidant Corp. .................................................... 8,700 763,969
U.S. Surgical Corp. .............................................. 18,600 612,637
------------
1,637,456
------------
MULTI-INDUSTRY -- 2.1%
Corning Glass, Inc................................................ 18,200 962,325
Tenneco, Inc.**................................................... 30,200 1,466,587
Tyco International Ltd. .......................................... 29,500 2,313,906
------------
4,742,818
------------
NATURAL ENERGY -- 1.0%
Coastal Corp. .................................................... 17,100 987,525
Consolidated Natural Gas Co. ..................................... 22,000 1,299,375
------------
2,286,900
------------
OIL DOMESTIC & CRUDE -- 0.5%
Pennzoil Co....................................................... 14,300 1,103,781
------------
OIL INTERNATIONAL -- 2.9%
Chevron Corp. .................................................... 10,500 813,094
Exxon Corp. ...................................................... 33,500 2,049,781
Mobil Corp. ...................................................... 15,800 1,149,450
Texaco, Inc. ..................................................... 7,700 887,425
Williams Cos., Inc. .............................................. 22,600 1,052,312
USX Marathon Corp. ............................................... 20,600 670,788
------------
6,622,850
------------
OIL SERVICE -- 0.9%
Halliburton Co. .................................................. 21,800 1,040,950
Schlumberger, Ltd. ............................................... 11,800 899,012
------------
1,939,962
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 69
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
PAPER PRODUCTS -- 1.9%
Champion International Corp. ..................................... 10,900 $ 645,144
Ikon Office Solutions, Inc. ...................................... 51,100 1,328,600
International Paper Co. +......................................... 16,200 854,550
Kimberly-Clark Corp. ............................................. 15,100 716,306
Mead Corp. ....................................................... 11,200 794,500
------------
4,339,100
------------
PHARMACEUTICALS -- 5.8%
American Home Products Corp....................................... 22,800 1,641,600
Amgen, Inc.**..................................................... 10,800 535,275
Bristol-Meyers Squibb Co. ........................................ 31,200 2,371,200
Lilly, (Eli) & Co. ............................................... 14,700 1,537,987
Medtronic, Inc. .................................................. 8,800 795,300
Merck & Co., Inc. ................................................ 26,300 2,414,669
Pfizer, Inc. ..................................................... 32,600 1,805,225
Schering-Plough Corp. ............................................ 17,800 854,400
Warner Lambert Co. ............................................... 9,100 1,156,269
------------
13,111,925
------------
PHOTOGRAPHY -- 0.2%
Eastman Kodak Co. ................................................ 5,900 385,713
------------
RAILROADS -- 0.7%
Burlington Northern Santa Fe...................................... 6,200 568,463
Caliber Systems, Inc. ............................................ 14,500 605,375
Union Pacific Corp. .............................................. 6,500 422,094
------------
1,595,932
------------
RESTAURANTS -- 0.4%
McDonald's Corp. ................................................. 18,000 851,625
------------
RETAIL -- 2.2%
CVS Corp. ........................................................ 18,000 1,014,750
Home Depot, Inc. ................................................. 22,500 1,061,719
Nordstrom, Inc. .................................................. 16,300 953,550
Wal-Mart Stores, Inc. ............................................ 54,800 1,945,400
------------
4,975,419
------------
RETAIL-MANUFACTURING -- 0.4%
Costco Companies, Inc............................................. 23,500 847,469
------------
TELECOMMUNICATIONS -- 2.7%
3 Com Corp. **.................................................... 33,000 1,647,937
Cisco Systems, Inc.**............................................. 31,700 2,389,388
Motorola, Inc. ................................................... 29,400 2,157,225
------------
6,194,550
------------
TELEPHONE -- 2.6%
Bell Atlantic Corp. .............................................. 13,440 972,720
GTE Corp. ........................................................ 31,800 1,417,088
MCI Communications Corp. ......................................... 46,200 1,316,700
WorldCom, Inc.**.................................................. 74,000 2,215,375
------------
5,921,883
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
20
<PAGE> 70
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
TOBACCO -- 1.1%
Philip Morris Cos., Inc. ......................................... 57,350 $ 2,501,894
------------
TOTAL COMMON STOCK
(COST $101,837,099)............................................... 130,465,613
------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS
S&P/MOODY'S MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ------------ ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
CORPORATE OBLIGATIONS -- 13.9%
CORPORATE BONDS -- 10.4%
AESOP Funding II Series 1997-1,
Class A1...................... AAA/Aaa 6.22% 10/20/01 $1,000,000 $ 998,907
Citibank Credit Card Master
Trust, ZCB.................... AAA/Aaa 0.00% 02/07/03 3,500,000 2,782,509
Citibank Credit Card Master
Trust I, ZCB.................. NR/Aaa 0.00% 08/15/06 2,000,000 1,247,730
Finova Capital Corp............. A-/Baa1 6.63% 09/15/01 3,500,000 3,482,500
First Union Corp................ A-/A2 6.55% 10/15/05 3,600,000 3,532,500
Ford Motor Credit Co............ A+/A1 5.75% 01/25/01 2,500,000 2,443,750
General Motors Acceptance
Corp.......................... A-/A3 7.13% 05/01/01 2,000,000 2,032,500
General Motors Acceptance
Corp.......................... A-/A3 6.88% 07/15/01 2,000,000 2,017,500
Sears Roebuck Acceptance Corp... A-/A2 7.00% 06/15/07 1,500,000 1,501,875
The Money Storetrust 1996-B..... AAA/Aaa 7.38% 05/15/17 3,500,000 3,567,276
------------
23,607,047
------------
MEDIUM TERM NOTES -- 3.5%
Bear Stearns.................... A2/A 6.50% 07/05/00 1,500,000 1,501,875
Chrysler Financial Corp......... A3/A- 5.63% 02/16/01 2,500,000 2,428,125
Fuji Bank....................... A3/NR 7.30% 03/29/49 1,500,000 1,509,109
PaineWebber Group............... BBB+/Baa1 7.02% 02/10/04 2,500,000 2,484,375
------------
7,923,484
------------
TOTAL CORPORATE OBLIGATIONS
(COST $31,295,447).............. 31,530,531
------------
U.S. GOVERNMENT OBLIGATIONS -- 8.6%
U.S. TREASURY BONDS -- 5.5%
U.S. Treasury Bond.............. 10.38%* 11/15/12 6,100,000 7,816,783
U.S. Treasury Bond.............. 8.13%* 08/15/21 4,000,000 4,672,520
------------
12,489,303
------------
U.S. TREASURY NOTES -- 3.1%
U.S. Treasury Note.............. 6.25%* 02/15/07 7,100,000 7,015,580
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(COST $19,321,287)............ 19,504,883
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
21
<PAGE> 71
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 14.8%
Federal Home Loan Mortgage
Corporation Pool #G10304...... 6.50% 04/01/09 $ 778,164 $ 771,112
Federal Home Loan Mortgage
Corporation Pool #E60891...... 6.50% 07/01/10 2,842,654 2,816,893
Federal Home Loan Mortgage
Corporation Pool #297505...... 8.00% 06/01/17 11,936 12,424
Federal Home Loan Mortgage
Corporation Pool #533301...... 10.50% 04/01/19 24,584 27,142
Federal Home Loan Mortgage
Corporation Pool #544066...... 8.00% 12/01/19 9,614 9,971
FNCL Pool #325602............... 6.50% 10/01/10 496,238 491,430
FNCL Pool #313349............... 10.00% 01/01/27 1,276,365 1,390,042
Federal National Mortgage
Association Pool #1997-M5
Cl-C.......................... 6.74% 08/25/07 2,000,000 2,009,373
Federal National Mortgage
Association Pool #251116...... 8.00% 07/27/27 7,370,200 7,568,274
Government National Mortgage
Association Pool #146301...... 10.00% 02/15/16 81,890 90,206
GNSF Pool #278853............... 9.00% 11/15/19 304,237 328,006
GNSF Pool #276635............... 9.00% 12/15/19 233,202 251,421
GNSF Pool #780330............... 9.00% 12/15/19 1,216,634 1,305,600
GNSF Pool #283578............... 8.00% 01/15/20 75,287 78,440
GNSF Pool #231236............... 9.00% 01/15/20 234,199 252,496
GNSF Pool #258039............... 9.00% 01/15/20 225,154 242,744
GNSF Pool #234214............... 8.00% 03/15/20 99,003 103,149
GNSF Pool #318567............... 8.00% 01/15/22 14,342 14,861
GNSF Pool #317257............... 8.00% 02/15/22 13,551 14,029
GNSF Pool #312656............... 8.00% 02/15/22 436,628 452,183
GNSF Pool #316108............... 8.00% 03/15/22 444,327 460,017
GNSF Pool #316859............... 8.00% 03/15/22 728,299 753,790
GNSF Pool #311456............... 8.00% 04/15/22 495,950 513,153
GNSF Pool #321799............... 8.00% 04/15/22 381,408 394,639
GNSF Pool #323085............... 8.00% 05/15/22 860,319 890,162
GNSF Pool #373336............... 7.50% 05/15/22 659,662 668,938
GNSF Pool #350519............... 7.00% 06/15/23 17,605 17,490
GNSF Pool #373346............... 7.50% 06/15/22 760,065 770,754
GNSF Pool #388995............... 7.50% 07/15/22 826,999 838,629
GNSF Pool #389002............... 7.50% 08/15/22 620,592 629,319
GNSF Pool #342065............... 8.00% 11/15/22 301,841 311,933
GNSF Pool #295283............... 7.50% 11/15/22 882,581 895,268
GNSF Pool #780227............... 8.00% 12/15/22 180,925 186,692
GNSF Pool #326465............... 7.00% 11/15/23 1,013,059 1,006,411
GNSF Pool #369671............... 7.00% 12/15/23 2,132,316 2,118,322
GNSF Pool #371045............... 8.00% 02/15/24 261,217 269,869
FGLMC Pool #D66935.............. 7.50% 01/01/26 357,923 362,061
FGLMC Pool #D66969.............. 7.50% 01/01/26 813,508 823,931
FGLMC Pool #D68671.............. 7.50% 02/01/26 551,507 557,884
FGLMC Pool #D70402.............. 7.50% 03/01/26 96,822 98,093
FGLMC Pool #D69671.............. 7.50% 03/01/26 30,348 30,728
FGLMC Pool #D69839.............. 7.50% 04/01/26 458,268 463,996
FGLMC Pool #D69930.............. 7.50% 04/01/26 438,241 443,719
FGLMC Pool #D70086.............. 7.50% 04/01/26 510,248 516,626
FGLMC Pool #D71116.............. 7.50% 05/01/26 96,875 98,086
FGLMC Pool #D71404.............. 7.50% 05/01/26 1,257,210 1,272,925
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(COST $33,369,770).............. 33,623,231
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 72
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ------ -------- ---------- ------------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 3.2%
BHP Finance +................... 6.42% 03/01/26 $4,000,000 $ 3,955,000
National Westminster Bank,
PLC........................... 9.45% 05/01/01 3,000,000 3,277,500
TOTAL CERTIFICATES OF DEPOSIT
(COST $7,116,612)............... 7,232,500
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------
<S> <C> <C>
TEMPORARY INVESTMENTS -- 1.7%
Temporary Investment Cash Fund.................................... 1,938,051 1,938,051
Temporary Investment Fund......................................... 1,938,051 1,938,051
------------
TOTAL TEMPORARY INVESTMENTS
(COST $3,876,102)................................................. 3,876,102
------------
TOTAL INVESTMENTS -- 99.7%
(COST $196,816,317)(A)............................................ 226,232,860
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%...................... 764,984
------------
NET ASSETS -- 100.0%............................................... $226,997,844
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $226,997,844.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $31,246,990
Unrealized depreciation................................. (1,830,447)
-----------
Net unrealized appreciation............................. $29,416,543
===========
</TABLE>
(ZCB) -- Zero Coupon Bond.
* Effective Yield.
** Non-income producing security.
+ Foreign Issuer.
See Notes to Financial Statements.
23
<PAGE> 73
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (cost $196,816,317).......................... $226,232,860
Interest and dividends receivable............................................... 1,361,543
Receivable for capital shares sold.............................................. 262,062
Receivable for investment securities sold....................................... 4,233,696
Deferred organization costs..................................................... 946
Prepaid expenses................................................................ 6,360
------------
Total Assets..................................................................... 232,097,467
------------
LIABILITIES:
Payable for capital shares redeemed............................................. 146,130
Payable for investment securities purchased..................................... 4,603,405
Investment advisory fees payable................................................ 72,161
Administration fees payable..................................................... 58,997
Shareholder service fees payable (A and K Shares)............................... 78,922
12b-1 fees payable (K Shares)................................................... 374
Transfer agent fees payable..................................................... 17,811
Other accrued expenses.......................................................... 121,823
------------
Total Liabilities................................................................ 5,099,623
------------
NET ASSETS....................................................................... $226,997,844
============
Net Assets:
A Shares........................................................................ $ 40,862,581
K Shares........................................................................ 866,502
SRF Shares...................................................................... 185,268,761
------------
Total............................................................................ $226,997,844
============
Shares Outstanding ($0.001 par value, 400 million shares authorized):
A Shares........................................................................ 2,015,318
K Shares........................................................................ 42,765
SRF Shares...................................................................... 11,598,114
------------
Total............................................................................ 13,656,197
============
NET ASSET VALUE
A Shares -- redemption price per share.......................................... $ 20.28
============
Maximum Sales Charge (A Shares)................................................. 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares / (100%-Maximum
Sales Charge))................................................................ $ 21.24
============
K Shares -- offering and redemption price per share............................. $ 20.26
============
SRF Shares -- offering and redemption price per share........................... $ 15.97
============
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................................. $ 13,656
Additional paid-in capital...................................................... 191,213,624
Distributions in excess of net investment income................................ (303,679)
Accumulated net realized gains on investment transactions....................... 6,657,700
Net unrealized appreciation on investments...................................... 29,416,543
------------
NET ASSETS, AUGUST 31, 1997...................................................... $226,997,844
============
</TABLE>
- ---------------
See Notes to Financial Statements.
24
<PAGE> 74
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I -- Asset Allocation
Portfolio (a):
Interest income................................................................. $ 339,911
Dividend income................................................................. 98,956
------------
438,867
------------
Expenses........................................................................ 30,161
Less: Fee waivers and expense reimbursements.................................... (2,355)
------------
27,806
------------
Net Investment Income from Master Investment Trust,
Series I -- Asset Allocation Portfolio.......................................... 411,061
Interest income................................................................. 1,268,273
Dividend income................................................................. 360,455
------------
Total Income..................................................................... 2,039,789
------------
EXPENSES:
Advisory fees................................................................... 176,810
Administration fees............................................................. 84,875
Administrative and Shareholder service fees (K Shares).......................... 1,027
Shareholder service fees (A Shares)............................................. 48,020
Shareholder service fees (SRF Shares)........................................... 90,661
12b-1 fees (K Shares)........................................................... 2,059
Accounting fees................................................................. 28,692
Custodian fees.................................................................. 2,774
Transfer Agent fees............................................................. 39,410
Registration fees............................................................... 22,960
Reports to shareholders......................................................... 29,778
Amortization of organization costs.............................................. 12,880
Audit fees...................................................................... 8,172
Legal fees...................................................................... 1,086
Directors' fees................................................................. 1,260
Other expenses.................................................................. 2,900
------------
Total Expenses................................................................ 553,364
Less: Fee waivers and expense reimbursements..................................... (17,925)
------------
Total Net Expenses.............................................................. 535,439
------------
NET INVESTMENT INCOME............................................................ 1,504,350
------------
REALIZED / UNREALIZED GAINS ON INVESTMENTS (A):
Net realized gains on investment transactions................................... 9,506,400
Net change in unrealized appreciation on investments............................ 26,567,078
------------
Net realized / unrealized gains on investments................................... 36,073,478
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................. $ 37,577,828
============
</TABLE>
- ---------------
(a) On June 23, 1997, the Asset Allocation Fund withdrew its investment in the
Master Investment Trust, Series I and invested directly in investment
securities.
See Notes to Financial Statements.
25
<PAGE> 75
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income....................................... $ 1,504,350 $ 712,729
Net realized gain on investment transactions................ 9,506,400 2,440,559
Net change in unrealized appreciation on investments........ 26,567,078 1,517,990
------------ ----------
Change in net assets resulting from operations.............. 37,577,828 4,671,278
------------ ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares.................................................. (418,386) (682,373)
K Shares.................................................. (7,432) (3,691)(a)
SRF Shares (b)............................................ (1,519,657) --
Net realized gains from investment transactions
A Shares.................................................. (1,684,638) (998,763)
K Shares.................................................. (38,229) (15,739)(a)
SRF Shares (b)............................................ (2,845,904) --
------------ ----------
Change in net assets from shareholder distributions.......... (6,514,246) (1,700,566)
------------ ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued................................. 167,089,824 15,869,326
Dividends reinvested........................................ 2,046,050 1,651,877
Cost of shares redeemed..................................... (8,787,396) (7,260,804)
------------ ----------
Change in net assets from capital share transactions......... 160,348,478 10,260,399
------------ ----------
Change in net assets......................................... 191,412,060 13,231,111
NET ASSETS
Beginning of Period......................................... 35,585,784 22,354,673
------------ ----------
End of Period (including distributions in excess of $303,679
and undistributed net investment income of $137,447,
respectively.)............................................ $226,997,844 $35,585,784
============ ===========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) On June 23, 1997, Asset Allocation Fund of the Seafirst Retirement Funds
withdrew its investment in Master Investment Trust, Series I and merged its
assets with the Asset Allocation Fund creating a new class of SRF Shares on
that date.
See Notes to Financial Statements.
26
<PAGE> 76
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Capital Income
Fund (the "Capital Income Fund") and Pacific Horizon Asset Allocation Fund (the
"Asset Allocation Fund"), collectively the "Funds" individually the "Fund". The
Funds offer A Shares and effective July 22, 1996, began offering K Shares. On
June 23, 1997, the Seafirst Asset Allocation Fund merged into the Pacific
Horizon Asset Allocation Fund and the Pacific Horizon Asset Allocation began
offering SRF Shares. A Shares and SRF Shares have a Shareholder Services Plan
while K Shares have a Distribution Plan and Administrative and Shareholder
Services Plan.
The Capital Income Fund seeks to provide investors with a total investment
return, comprised of current income and capital appreciation, consistent with
prudent investment risk. The Asset Allocation Fund seeks to obtain long term
growth from Capital Appreciation, dividend and interest income. The Asset
Allocation Fund seeks to achieve its objective by actively allocating
investments among the three major asset categories, Bonds, equity securities and
cash equivalents.
Prior to June 23, 1997, the Asset Allocation Fund sought to achieve its
investment objective by investing substantially all of its assets in the Asset
Allocation Portfolio of the Trust, which had the same investment objective as
that of the Fund. Effective June 23, 1997, the Fund withdrew its investment in
the Asset Allocation Portfolio and began investing its assets directly in
securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Funds' investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS served as the distributor of the
Funds' shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS served as transfer agent and
dividend disbursing agent of the Funds through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and
27
<PAGE> 77
Bank of America (the "Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc.("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their 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 in the financial statements. Actual
results could differ from those of estimates.
PORTFOLIO VALUATIONS:
The Funds value portfolio securities (other than debt securities with
remaining maturities of 60 days or less) at the last reported sales price on the
securities exchange on which such securities are primarily traded or at the last
sales price on the NASDAQ National Securities Market. Securities not listed on
an exchange or the NASDAQ National Securities Market or securities for which
there were no transactions are valued at the mean between the current quoted bid
and ask prices on the date of the valuation. Bid
28
<PAGE> 78
price is used when no ask price is available. The Fund may also use an
independent pricing service, approved by the Board of Directors, to value
certain of their 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 Directors. Debt securities with remaining maturities of 60 days
or less are valued at amortized cost.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recognized on the ex-dividend date. Realized gains and
losses from security transactions are recorded on an identified cost basis.
Prior to June 23, 1997, the Asset Allocation Fund recorded its share of the
investment income, expenses and realized and unrealized gains and losses
recorded by the Portfolio on a daily basis. The investment income, expenses and
realized and unrealized gains and losses were allocated daily to investors in
the Portfolio based upon the value of their investments in the Portfolio. Such
investments were adjusted on a daily basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
The Asset Allocation Fund incurred certain costs in connection with its
organization. Such costs have been deferred and are being amortized on a
straight line basis over five years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income is declared and paid as a dividend,
quarterly, to shareholders of record at the close of business on record date.
Net realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains of the Funds can be
offset by capital loss carryovers of the Funds, such gains will not be
distributed. Dividends and distributions are recorded by the Funds on the
ex-dividend date.
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 consid-
29
<PAGE> 79
ered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the composition of net
assets based on their federal tax-basis treatment; temporary differences do not
require reclassification. Dividends and distributions to shareholders which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized gains. To
the extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET GAIN/(LOSS)
INVESTMENT ON
INCOME INVESTMENTS
------------- ------------
<S> <C> <C>
Capital Income
Fund $ 326,372 $ (288,285)
Asset Allocation
Fund (1,681) 1,679
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
During the year, the Capital Income Fund utilized $2,934,042 of its
available capital loss carryover to offset realized capital gains for federal
tax purposes.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America and the
Funds had an Administration Agreement with BISYS and a Distribution Agreement
with the Distributor. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee from the Funds, which is accrued
daily and payable monthly, at an annual rate of 0.45% and 0.40% of the Capital
Income Fund and the Asset Allocation Fund, respectively, of average daily net
assets. Pursuant to the terms of the Administration Agreement, BISYS is entitled
to a fee, which is accrued daily and payable monthly, at an annual rate of 0.20%
and 0.15%, of the average daily net assets of the Capital Income and Asset
Allocation Fund, respectively. For the six months ended August 31, 1997, BISYS
agreed to waive $17,413 of its fee as Administrator for the Asset Allocation
Fund.
For the six months ended August 31, 1997, the Distributor advised the Funds
that it retained $78,250 and $10,017 from commissions earned on sales of the
Capital Income Fund's and Asset Allocation Fund's shares, respectively. For the
same period, Bank of America and its affiliates advised the Funds that they
retained $561,537 and $80,229 from commissions earned on sales of shares of the
Capital
30
<PAGE> 80
Income Fund and Asset Allocation Fund, respectively.
The Funds have a Shareholder Services Plan (the "Plan") under which each
Fund pays the Distributor for shareholder servicing expenses incurred in
connection with A Shares of each Fund. Under the Plan, payments for shareholder
servicing expenses may not exceed 0.25% of each Fund's average daily net assets
for A Shares. For the six months ended August 31, 1997, the Capital Income Fund
and Asset Allocation Fund incurred charges of $424,670 and $48,020,
respectively, pursuant to the Plan. The Funds were advised that of these
amounts, the Distributor retained $42,438 and $3,323 from the Capital Income
Fund and Asset Allocation Fund, respectively, and affiliates of Bank of America
retained $360,242 and $41,559, respectively. The Plan provides that if, in any
month, the fees paid to the Distributor are less than the costs incurred by the
Distributor, the excess costs will be included in future computations of the
fee, provided that any excess cost will not be carried forward beyond the end of
the fiscal year in which such excess costs were incurred.
The Funds have adopted a Distribution Plan and an Administrative and
Shareholder Services Plan (the "Administrative Plan") with respect to K Shares
of the Funds. Under the Distribution Plan, the Funds pay the Distributor for
expenses primarily intended to result in the sale of the Funds' K Shares. Under
the Distribution Plan, payments by the Funds for distribution expenses may not
exceed 0.75% of the average daily net assets of each Fund's K Shares. Payments
for distribution expenses under the Distribution Plan are subject to Rule 12b-1
under the Act. Under the Administrative Plan, the Funds pay for expenses
incurred in connection with shareholder services provided by the Distributor and
payments to Service Organizations for the provision of support services with
respect to beneficial owners of K Shares. Under the Administrative Plan,
payments for shareholder services and administrative services may not exceed
0.25% and 0.75%, respectively, of the average daily net assets of each Fund's K
Shares. The total of all payments under the Distribution Plan and the
Administrative Plan may not exceed, in the aggregate, the annual rate of 1.00%
of the average daily net assets of each Fund's K Shares. For the six months
ended August 31, 1997, the Distributor received fees of $1,740 and $1,027 for
the Capital Income Fund and Asset Allocation Fund, respectively. The Funds were
advised that of these amounts the Distributor retained $1,415, and $929 from the
Capital Income Fund and Asset Allocation Fund and affiliates of Bank of America
retained $282 from the Capital Income Fund. For the same period, shareholder
services fees of $43 and $98 were waived by the Capital Income Fund and Asset
Allocation Fund, respectively.
The Asset Allocation Fund has a Shareholder Services Plan under which the
Fund pays the Distributor for shareholder servicing expenses incurred in
connection with the SRF shares. Under the Plan, payments for shareholder
servicing expenses may not exceed 0.25% of the
31
<PAGE> 81
Fund's average daily net assets for SRF shares. For the six months ended August
31, 1997, Asset Allocation Fund incurred charges of $90,661, pursuant to the
Plan. The Fund was advised that of this amount the affiliates of Bank of America
retained $90,082. For the same period, shareholder services fees of $579 were
waived by The Asset Allocation Fund.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $231,892 and $39,410 from the Capital
Income Fund and Asset Allocation Fund, respectively, for the six months ended
August 31, 1997.
For the six months ended August 31, 1997, the Capital Income Fund and Asset
Allocation Fund incurred legal charges totaling $13,056 and $1,086,
respectively, which were earned by a law firm, a partner of which serves as
Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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 pursuant to the Retirement Plan
amounted to $1,083 and $70 for the Capital Income Fund and
32
<PAGE> 82
Asset Allocation Fund, respectively, for the six months ended August 31, 1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of Capital Income Fund's securities (excluding short-term
investments) amounted to $119,908,481 and $107,639,071, respectively. The cost
of purchases and the proceeds from sales of Asset Allocation Fund's securities
(excluding short-term investments) amounted to $81,885,812 and $84,330,777,
respectively.
33
<PAGE> 83
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of common stock of the Funds are summarized below:
<TABLE>
<CAPTION>
CAPITAL INCOME FUND
----------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued........................................... 2,723 $48,780 4,375 $ 75,024
Reinvested....................................... 1,464 25,865 1,793 30,024
Redeemed......................................... (1,983) (35,445) (3,373) (57,813)
-------- ------- ------ -----------
Net increase...................................... 2,204 $39,200 2,795 $ 47,235
======== ======= ====== ===========
K Shares
Issued........................................... 37,545 $677,367 61,106 $ 1,055,431
Reinvested....................................... 6,439 113,340 1,082 18,016
Redeemed......................................... (9,203) (163,866) (1,396) (24,309)
-------- -------- ------ -----------
Net increase...................................... 34,781 $626,841 60,792(a) $ 1,049,138(a)
======== ======== ====== ===========
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
-------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
--------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- --------- -------- -----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued.......................................... 308 $ 6,128 825 $ 15,144
Reinvested...................................... 101 2,000 90 1,632
Redeemed........................................ (189) (3,759) (395) (7,251)
------ -------- ------ -----------
Net increase..................................... 220 $ 4,369 520 $ 9,525
====== ======== ====== ===========
K Shares
Issued.......................................... 20,947 $422,460 37,991 $ 724,963
Reinvested...................................... 2,291 45,662 1,051 19,438
Redeemed........................................ (19,023) (380,905) (491) (9,394)
------ -------- ------ -----------
Net increase..................................... 4,215 $ 87,217 38,551(a) $ 735,007(a)
====== ======== ====== ===========
SRF Shares (000)(b)
Issued.......................................... 11,883 $160,540 -- $ --
Reinvested...................................... -- -- -- --
Redeemed........................................ (285) (4,648) -- --
------ -------- ------ -----------
Net Increase..................................... 11,598 $155,892 -- $ --
====== ======== ====== ===========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
34
<PAGE> 84
PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ---------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(A) 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR................. $ 17.35 $ 16.42 $ 13.65 $ 15.42 $ 13.32
--------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income............. 0.30 0.57 0.62 0.57 0.50
Net realized and unrealized gains
(losses) on investment
transactions.................... 2.64 2.34 2.84 (1.43) 2.36
--------- -------- -------- -------- --------
Total income (loss) from investment
operations........................ 2.94 2.91 3.46 (0.86) 2.86
--------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income............... (0.30) (0.57) (0.69) (0.54) (0.48)
Dividends to shareholders from net
realized gains on investment
transactions.................... (1.20) (1.41) 0.00 (0.37) (0.28)
--------- -------- -------- -------- --------
Total Dividends and
Distributions..................... (1.50) (1.98) (0.69) (0.91) (0.76)
--------- -------- -------- -------- --------
Net change in net asset value per
share............................. 1.44 0.93 2.77 (1.77) 2.10
--------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 18.79 $ 17.35 $ 16.42 $ 13.65 $ 15.42
========= ======== ======== ======== ========
Total return (excludes sales
charge)........................... 17.62%(e) 18.53% 25.96% (5.61%) 21.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 376 $ 309 $ 247 $ 198 $ 191
Ratio of expenses to average net
assets.......................... 1.12%(d) 1.18% 1.23% 0.97% 0.46%
Ratio of net investment income
(loss) to average net assets.... 3.42%(d) 3.40% 4.05% 4.48% 4.19%
Ratio of expenses to average net
assets*......................... (b) 1.19%** 1.26%** 1.14% 1.20%
Ratio of net investment income to
average net assets*............. (b) (b) (b) 4.31% 3.45%
Portfolio turnover rate........... 33%(e) 124% 57% 94% 103%
Average commission rate paid (c).. $ 0.0210 $ 0.0210 $ -- $ -- $ --
</TABLE>
- ---------------
* During the period, certain fees were During the period, certain fees were
voluntarily reduced and/or reimbursed. If such voluntary fee reductions
and/or reimbursements had not occurred, the ratios would have been as
indicated.
** During the years ended February 28, 1997 and February 29, 1996, the
Portfolio received credits from its custodian for interest earned on
uninvested balances which were used to offset custodian fees and expenses.
If such credits had not occurred, the expense ratios would have been as
indicated. The ratio of net investment income was not affected.
(a) As of July 22, 1996, the Portfolio designated the existing series of shares
as "A" Shares.
(b) There were no waivers or reimbursements during the period.
(c) Represents the dollar amounts of commissions paid on Portfolio transactions
divided by the total number of shares purchased or 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 is not required for prior periods.
(d) Annualized.
(e) Not annualized.
See Notes to Financial Statements.
35
<PAGE> 85
PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(A)
------------ ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR................... $ 17.30 $ 16.24
-------- --------
Income from Investment Operations:
Net investment income......................................... 0.25 0.32
Net realized gains on investment transactions................. 2.62 2.43
-------- --------
Total income from investment operations........................ 2.87 2.75
-------- --------
Less: Dividends and Distributions:
Dividends to shareholders from net investment income.......... (0.27) (0.28)
Distributions to shareholders from net realized gains on
investment transactions..................................... (1.20) (1.41)
-------- --------
Total Dividends and Distributions.............................. (1.47) (1.69)
-------- --------
Net change in net asset value per share........................ 1.40 1.06
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD....................... $ 18.70 $ 17.30
======== ========
Total return................................................... 17.28%(e) 17.47%(e)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)........................ $ 2 $ 1
Ratio of expenses to average net assets....................... 1.62%(d) 1.66%(d)
Ratio of net investment income to average net assets.......... 2.94%(d) 2.85%(d)
Ratio of expenses to average net assets*...................... (b) 1.91%(d)**
Ratio of net investment income to average net assets*......... (b) 2.60%(d)
Portfolio turnover rate....................................... 33%(e) 124%
Average commission rate paid (c).............................. $ 0.0210 $ 0.0210
</TABLE>
- ---------------
* 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.
** Fees paid by third parties had no effect on the ratios.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) There were no waivers or reimbursement during the period.
(c) Represents the dollar amounts of commissions paid on Portfolio transactions
divided by the total number of shares purchased or 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 is not required for prior periods.
(d) Annualized.
(e) Not annualized.
See Notes to Financial Statements.
36
<PAGE> 86
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------ PERIOD ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(B) 1996 1995 1994(A)
--------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR.............. $ 19.40 $ 17.52 $ 15.15 $14.84 $ 15.00
------- -------- -------- ------ -------
Income from Investment
Operations:
Net investment income.......... 0.25 0.48 0.52 0.48 0.03
Net realized and unrealized
gains (losses) on investment
transactions................. 1.74 2.50 2.86 0.24 (0.19)
------- -------- -------- ------ -------
Total income (loss) from
investment operations.......... 1.99 2.98 3.38 0.72 (0.16)
------- -------- -------- ------ -------
Less Dividends and
Distributions:
Dividends to shareholders from
net investment income........ (0.22) (0.46) (0.53) (0.41) --
Dividends to shareholders from
net realized gains on
investment transactions...... (0.89) (0.64) (0.48) -- --
------- -------- -------- ------ -------
Total Dividends and
Distributions.................. (1.11) (1.10) (1.01) (0.41) --
------- -------- -------- ------ -------
Net change in net asset value
per share...................... 0.88 1.88 2.37 0.31 (0.16)
------- -------- -------- ------ -------
NET ASSET VALUE PER SHARE, END
OF PERIOD...................... $ 20.28 $ 19.40 $ 17.52 $15.15 $ 14.84
======= ======== ======== ====== =======
Total return (excludes sales
charge)........................ 10.43%++ 17.64% 22.80% 5.03% (1.07%)++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................... $38,075 $ 34,838 $ 22,355 $5,694 $ 666
Ratio of expenses to average
net assets................... 1.12%+ 1.25% 0.62% 0.00% 0.00%+
Ratio of net investment income
(loss) to average
net assets................... 2.62%+ 2.59% 3.49% 4.25% 4.20%+
Ratio of expenses to average
net assets*.................. 1.22%+ 1.94% 2.92% 7.89% 83.95%+
Ratio of net investment income
to average
net assets*.................. 2.52%+ 1.90% 1.19% (3.64%) (79.75% )+
</TABLE>
- ---------------
* 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.
+ Annualized.
++ Not annualized.
(a) Period from January 13, 1994 (inception date) to February 28, 1994.
(b) As of July 22, 1996, the Fund designated the existing series of shares as
"A" Shares.
See Notes to Financial Statements.
37
<PAGE> 87
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR..... $ 19.40 $17.23
------- ------
Income from Investment Operations:
Net investment income.......................... 0.21 0.19
Net realized gains/(losses) on investment
transactions................................. 1.72 2.80
------- ------
Total income from investment operations.......... 1.93 2.99
------- ------
Less: Dividends and Distributions:
Dividends to shareholders from net investment
income....................................... (0.18) (0.18)
Distributions to shareholders from net realized
gains on investment transactions............. (0.89) (0.64)
------- ------
Total Dividends and Distributions................ (1.07) (0.82)
------- ------
Net change in net asset value per share.......... 0.86 2.17
------- ------
NET ASSET VALUE PER SHARE, END OF PERIOD......... $ 20.26 $19.40
======= ======
Total return..................................... 10.08%++ 17.69%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)......... $ 815 $ 748
Ratio of expenses to average net assets........ 1.63%+ 1.94%+
Ratio of net investment income to average net
assets....................................... 2.11%+ 2.31%+
Ratio of expenses to average net assets*....... 1.73%+ 3.26%+
Ratio of net investment income to average net
assets*...................................... 2.01%+ 0.99%+
</TABLE>
- ---------------
* 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.
+ Annualized.
++ Not annualized.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
38
<PAGE> 88
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
--------------------------
MARCH 1,
JUNE 23, 1997
1997 THROUGH THROUGH YEAR ENDED
AUGUST 31, JUNE 22, ------------------------------------------
1997(C) 1997(B) FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1997(B) 1996(B) 1995(B)
------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR............................. $ 15.79 $ 15.94 $ 14.96 $13.48 $13.94
-------- ------- -------- ------ ------
Income from Investment Operations:
Net investment income............... 0.09 1.61 0.45 0.47 0.46
Net realized and unrealized gains
(losses) on investment
transactions...................... 0.09 (0.15) 2.13 2.49 0.12
-------- ------- -------- ------ ------
Total income from investment
operations.......................... 0.18 1.46 2.58 2.96 0.58
-------- ------- -------- ------ ------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income................. -- (1.61) (0.45) (0.47) (0.46)
Distributions to shareholders from
net realized gains................ -- -- (1.15) (1.01) (0.58)
-------- ------- -------- ------ ------
Total Dividends and Distributions.... -- (1.61) (1.60) (1.48) (1.04)
-------- ------- -------- ------ ------
Net change in net asset value per
share............................... 0.18 (0.15) 0.98 1.48 (0.46)
-------- ------- -------- ------ ------
NET ASSET VALUE PER SHARE, END OF
PERIOD.............................. $ 15.97 $ 15.79 $ 15.94 $14.96 $13.48
======== ======= ======== ====== ======
Total Return......................... 10.51%++ 7.88%++ 18.03% 22.44% 4.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions)........................ $ 185 $ 169 $ 174 $ 158 $ 145
Ratio of expenses to average net
assets............................ 1.00%+ 0.75%+ 0.95% 0.94% 0.78%
Ratio of net investment income
(loss) to average net assets...... 2.92%+ 2.23%+ 2.88% 3.19% 3.40%
Ratio of expenses to average net
assets*........................... 1.00%+ 1.15%+ 1.39% 1.42% 1.38%
Ratio of net investment income to
average net assets*............... 2.92%+ 1.83%+ 2.44% 2.71% 2.80%
Portfolio turnover rate............. 39%++ N/A N/A N/A N/A
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
+ Annualized.
++ Not Annualized.
(a) 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.
39
<PAGE> 89
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
- ------------------------------
DECEMBER 6, JANUARY 1,
1993 1993
THROUGH THROUGH YEAR ENDED
FEBRUARY 28, DECEMBER 5, DECEMBER 31,
1994(B) 1993(A) 1992(A)
- ------------ ------------ ------------
<S> <C> <C>
$13.86 $12.99 $12.75
------ ------ ------
0.05 0.43 0.46
0.08 0.87 0.24
------ ------ ------
0.13 1.30 0.70
------ ------
(0.05) (0.43) (0.46)
-- -- --
------ ------ ------
(0.05) (0.43) (0.46)
------ ------
0.08 0.87 0.24
------ ------ ------
$13.94 $13.86 $12.99
====== ====== ======
0.94%++ 10.15%++ 5.62%
$ 157 $ 150 $ 107
0.95%+ 0.95%+ 0.95%
2.64%+ 3.47%+ 3.68%
1.64%+ 0.95%+ 0.95%
1.95%+ 3.47%+ 3.68%
N/A 79% 171%
</TABLE>
- ---------------
(b) Represents activity of the Fund prior to its reorganization from the
Seafirst Retirement Funds -- Asset Allocation Fund into SRF Shares of the
Fund. Since the operation and organization of the Fund was changed upon
reorganization this activity may not be reflective of activity after the
reorganization.
(c) Date of commencement of operations of SRF Shares of the Fund.
See Notes to Financial Statements.
40
<PAGE> 90
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 91
----------------
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
----------------
[PACIFIC HORIZON FUNDS LOGO]
Provident Distributor, Inc., Distributor
GRI-0014 10/97
<PAGE> 92
PACIFIC HORIZON INCOME FUND
SEMI-ANNUAL REPORT
AUGUST 31, 1997
SHORT-TERM GOVERNMENT FUND
INVESTING FOR ALL
THE TIMES OF YOUR LIFE
NOT FDIC INSURED
PACIFIC HORIZON INCOME FUND
<PAGE> 93
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 94
CONTENTS
<TABLE>
<S> <C>
. FUND FACTS 2-3
.
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
.
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
.
. PACIFIC HORIZON SHORT-TERM
. GOVERNMENT FUND
.
. Portfolio of Investments 10
.
. Statement of Assets
. and Liabilities 11
.
. Statement of Operations 12
.
. Statements of Changes
. in Net Assets 13
.
. Notes to Financial Statements 14-18
.
. Financial Highlights 19
</TABLE>
<PAGE> 95
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 96
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 97
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 98
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 99
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 100
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 101
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 102
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 103
PACIFIC HORIZON SHORT-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
RATE DATE AMOUNT (NOTE 2)
---- -------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 30.8%
Federal Home Loan Bank Discount Note.............. 5.40% 04/15/98 $1,050,000 $ 1,014,133
Federal Home Loan Mortgage Corp.,
Pool #L70306.................................... 5.50% 08/01/98 1,610,868 1,604,537
Federal Home Loan Mortgage Corp.
Pool #1645PJ.................................... 5.50% 10/15/02 500,000 497,340
Federal Home Loan Mortgage Corp., Pool #1527...... 5.50% 04/15/14 695,769 694,112
Federal National Mortgage Assoc. Series 1993 -- 26
D............................................... 6.00% 02/27/98 547,754 546,196
Federal National Mortgage Assoc. Series 1997 -- 14
QA.............................................. 6.00% 08/18/08 873,568 871,769
Government National Mortgage Assoc. Series 1995 5A
A............................................... 7.00% 10/20/10 999,209 1,002,956
Student Loan Marketing Association................ 7.72% 01/25/99 1,000,000 1,023,740
Tennessee Valley Authority Note................... 5.95% 09/15/98 1,000,000 1,005,000
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $8,255,171)................................. 8,259,783
-----------
U.S. TREASURY OBLIGATIONS -- 57.2%
U.S. Treasury Note................................ 7.25% 02/15/98 2,375,000 2,391,981
U.S. Treasury Note................................ 5.88% 10/31/98 1,500,000 1,500,930
U.S. Treasury Note................................ 5.63% 11/30/98 6,500,000 6,485,049
U.S. Treasury Note................................ 6.25% 03/31/99 2,000,000 2,011,180
U.S. Treasury Note................................ 6.38% 04/30/99 2,900,000 2,921,199
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $15,290,306)................................ 15,310,339
-----------
COMMERCIAL PAPER -- 8.6%
Merrill Lynch & Co................................ 5.59% 09/04/97 1,300,000 1,299,394
Parker Hanifen.................................... 5.55% 09/03/97 1,000,000 999,692
-----------
TOTAL COMMERCIAL PAPER
(COST $2,299,086)................................. 2,299,086
-----------
SHARES
----------
SHORT TERM INVESTMENTS -- 2.4%
TEMPORARY INVESTMENT -- FED FUNDS
(COST $632,988)................................. 632,988 632,988
-----------
TOTAL INVESTMENTS -- 99.0%
(COST $26,477,551) (A)............................ 26,502,196
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%...... 263,610
-----------
NET ASSETS -- 100.0%............................... $26,765,806
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $26,765,806.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $ 28,154
Unrealized depreciation...................................... (3,509)
--------
Net unrealized appreciation.................................. $ 24,645
========
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 104
PACIFIC HORIZON SHORT-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $26,477,551)............... $26,502,196
Interest Receivable.................................................. 309,978
Receivable for capital shares sold................................... 124,230
Prepaid assets....................................................... 2,276
-----------
Total Assets........................................................... 26,938,680
-----------
LIABILITIES:
Dividends payable.................................................... 118,817
Payable for capital shares redeemed.................................. 2,985
Custodian and fund accounting fees payable........................... 26,819
Transfer agent fees payable.......................................... 5,197
Legal fees payable................................................... 168
Other accrued expenses............................................... 18,888
-----------
Total Liabilities...................................................... 172,874
-----------
NET ASSETS............................................................. $26,765,806
===========
Shares Outstanding ( $0.001 par value, 200 million shares
authorized): ........................................................ 2,671,605
===========
NET ASSET VALUE
Redemption price per share........................................... $10.02
=====
Maximum Sales Charge................................................. 4.50%
Maximum Offering Price (Net Asset Value / (100%-Maximum Sales
Charge))........................................................... $10.49
=====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par..................................... $ 2,672
Additional paid-in capital......................................... 26,727,291
Net unrealized appreciation on investments......................... 24,645
Accumulated net realized gains on investment transactions.......... 11,198
-----------
NET ASSETS, AUGUST 31, 1997............................................ $26,765,806
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 105
PACIFIC HORIZON SHORT-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.............................................................. $ 613,756
--------
EXPENSES:
Other expenses........................................................ 33,814
Custodian and fund accounting fees.................................... 28,054
Investment advisory fees.............................................. 26,683
Shareholder service fees.............................................. 26,683
Transfer Agent fees................................................... 21,988
Administration fees................................................... 21,347
Legal fees............................................................ 518
--------
Total Expenses.................................................... 159,087
Less: Fee waivers and expense reimbursements............................ (132,404)
--------
Total Net Expenses...................................................... 26,683
--------
NET INVESTMENT INCOME................................................... 587,073
--------
NET REALIZED / UNREALIZED GAINS ON INVESTMENTS:
Net realized gain on investment transactions.......................... 12,765
Net change in unrealized depreciation on investments.................. 33,599
--------
Net realized/unrealized gains on investments.......................... 46,364
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 633,437
========
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 106
PACIFIC HORIZON SHORT-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................. $ 587,073 $ 269,337
Net realized gains on investment transactions..... 12,765 6,933
Net change in unrealized depreciation
on investments.................................. 33,599 (8,954)
----------- -----------
Change in net assets resulting from operations.... 633,437 267,316
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................. (587,073) (269,337)
Net realized gains on investment transactions..... -- (6,933)
Excess of net realized gains on investment
transactions.................................... -- (1,567)
----------- -----------
Change in net assets from shareholder
distributions..................................... (587,073) (277,837)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued....................... 16,212,420 17,406,395
Dividends reinvested.............................. 2,192 646
Cost of shares redeemed........................... (5,036,645) (1,855,045)
----------- -----------
Change in net assets from capital share
transactions...................................... 11,177,967 15,551,996
----------- -----------
Change in net assets................................ 11,224,331 15,541,475
NET ASSETS
Beginning of Period............................... 15,541,475 --
----------- -----------
End of Period..................................... $26,765,806 $15,541,475
=========== ===========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
13
<PAGE> 107
PACIF IC HORIZON SHORT-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Short-Term
Government Fund (the "Fund"). The Fund commenced operations on August 2, 1996.
The Fund offers A Shares only.
The Fund seeks to provide investors with a high level of current income,
consistent with relative stability of principal.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services.
14
<PAGE> 108
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The Fund values portfolio securities (other than debt securities with
remaining maturities of 60 days or less) at the last reported sales price on the
securities exchange on which such securities are primarily traded or at the last
sales price on the NASDAQ National Securities Market. Securities not listed on
an exchange or the NASDAQ National Securities Market or securities for which
there were no transactions are valued at the mean between the current quoted bid
and ask prices on the date of valuation. Bid price is used when no ask price is
available. The Fund may also use an independent pricing service, approved by the
Board of Directors, 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 Directors. Debt securities
with remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Fund records security transactions on a trade date plus one day basis.
Interest income, including accretion of discount and amortization of premium, is
accrued daily. Realized gains and losses from securities transactions are
recorded on the identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The Fund incurred certain costs in connection with its organization. Such
costs have been deferred and are being amortized by the fund on a straight line
basis over five years.
15
<PAGE> 109
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Fund's net investment income is declared daily and paid monthly as a
dividend to shareholders of record at the close of business on record date. Net
realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains of the Fund can be
offset by capital loss carryovers of the Fund, such gains will not be
distributed. Dividends and distributions are recorded by the Fund on the
ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
FEDERAL INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
Capital losses incurred after October 31, for the Fund are deemed to arise
on the first business day of the following fiscal year for tax purposes. The
Fund has incurred and will elect to defer such capital losses of $1,567 after
October 31, 1996.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement with Bank of America. For the
six months ended August 31, 1997, the Fund had an Administration Agreement with
BISYS and a Distribution Agreement with the Distributor. Pursuant to the terms
of the Investment Advisory Agreement, Bank of America is entitled to a fee from
the Fund, which is accrued daily and payable monthly, at an annual rate of 0.25%
of the Fund's average daily net assets. Pursuant to the terms of the
Administration Agreement, BISYS is entitled to a fee from the Fund, which is
accrued daily and payable monthly, at an annual rate of 0.20% of the Fund's
average daily net assets. For the six months ended August 31, 1997, Bank of
America and BISYS voluntarily waived fees from the Fund of $26,683 and $21,347,
respectively. During the same period Bank of America
16
<PAGE> 110
reimbursed $57,691 in operating expenses of the Fund.
For the six months ended August 31, 1997, the Distributor advised the Fund
that it retained no commissions on sales of the Fund's shares. For the same
period, Bank of America and its affiliates advised the Fund that they retained
no commissions on sales of the Fund's shares.
The Fund has a Shareholder Services Plan (the "Plan") under which the Fund
pays the Distributor for shareholder servicing expenses incurred in connection
with A Shares of the Fund. Under the Plan, payments by the Fund for shareholder
servicing expenses may not exceed 0.25% of each Fund's average daily net assets.
For the six months ended August 31, 1997, shareholder service fees incurred
pursuant to the Plan totaled $26,683. The Plan provides that if, in any month,
the fees paid to the Distributor are less than the costs incurred by the
Distributor, the excess costs will be included in future computations of the
fee, provided that any excess costs will not be carried forward beyond the end
of the fiscal year in which such excess costs were incurred. The Distributor
waived the shareholder servicing fees of $26,683 during the six months ended
August 31, 1997.
BISYS Ohio served the Fund as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $21,988 for the six months ended August
31, 1997.
For the six months ended August 31, 1997, the Fund incurred legal charges
totaling $518 which were earned by a law firm, a partner of which serves as
Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company
17
<PAGE> 111
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 pursuant to the Retirement Plan amounted to $184 for the Fund, for the
period ended August 31, 1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of Fund securities (excluding short-term investments)
amounted to $19,874,347 and $11,861,426, respectively.
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Fund are summarized below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 PERIOD ENDED
(UNAUDITED) FEBRUARY 28, 1997
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
A Shares
Issued.................. 1,621,051 $16,212,420 1,739,262 $17,406,395
Reinvested.............. 219 2,192 65 646
Redeemed................ (503,608) (5,036,645) (185,384) (1,855,045)
--------- ----------- --------- -----------
Net increase.............. 1,117,662 $11,177,967 1,553,943(a) $15,551,996(a)
========= =========== ========= ===========
</TABLE>
- ---------------
(a) Period from August 2, 1996 (inception date of fund) to February 28, 1997.
18
<PAGE> 112
PACIFIC HORIZON SHORT-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
AUGUST 31, ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD... $ 10.00 $ 10.00
------- -------
Income from Investment Operations:
Net investment income.......................... 0.28 0.32
Net realized gains on investment
transactions................................. 0.02 0.01
------- -------
Total income from investment operations.......... 0.30 0.33
Less Dividends and Distributions:
Dividends to shareholders from net investment
income....................................... (0.28) (0.32)
Distributions to shareholders from net realized
gains on investment transactions............. 0.00 (0.01)
------- -------
Total Dividends and Distributions................ (0.28) (0.33)
------- -------
Net change in net asset value per share.......... 0.02 0.00
------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD......... $ 10.02 $ 10.00
======= =======
Total return..................................... 3.00%(c) 3.33%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)........... $ 26,766 $ 16
Ratio of expenses to average net assets.......... 0.25%(b) 0.11%(b)
Ratio of net investment income to average
net assets................................... 5.50%(b) 5.53%(b)
Ratio of expenses to average net assets*......... 1.49%(b) 3.15%(b)
Ratio of net investment income to average
net assets*.................................. 4.26%(b) 2.49%(b)
Portfolio turnover rate.......................... 63%(c) 81%(c)
</TABLE>
- ---------------
* 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 shown.
(a) Period from August 2, 1996 (inception date of fund) to February 28, 1997.
(b) Annualized.
(c) Not annualized.
See Notes to Financial Statements.
19
<PAGE> 113
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 114
--------------
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
--------------
[PACIFIC HORIZON INCOME FUND LOGO]
Provident Distributor, Inc., Distributor
SGV-0005 10/97
<PAGE> 115
PACIFIC HORIZON INCOME FUNDS
SEMI-ANNUAL REPORT
AUGUST 31, 1997
U.S. GOVERNMENT SECURITIES FUND
CORPORATE BOND FUND
INTERMEDIATE BOND FUND
INVESTING FOR ALL
THE TIMES OF YOUR LIFE
NOT FDIC INSURED
PACIFIC HORIZON INCOME FUNDS
<PAGE> 116
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 117
Contents
<TABLE>
<S> <C>
. FUND FACTS 2-3
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
. PACIFIC HORIZON U.S.
. GOVERNMENT SECURITIES FUND AND
. CORPORATE BOND FUND
. Portfolios of Investments 10-12
. Statements of Assets
. and Liabilities 13-14
. Statements of Operations 15-16
. Statements of Changes
. in Net Assets 17-18
. PACIFIC HORIZON INTERMEDIATE BOND
. FUND
. Statement of Assets
. and Liabilities 19
. Statement of Operations 20
. Statements of Changes
. in Net Assets 21
. Notes to Financial Statements 22-29
. Financial Highlights 30-39
. MASTER INVESTMENT TRUST, SERIES
. I -- INVESTMENT
. GRADE BOND PORTFOLIO
. Portfolio of Investments 40-41
. Statement of Assets
. and Liabilities 42
. Statement of Operations 43
. Statements of Changes
. in Net Assets 44
. Notes to Financial Statements 45-47
. Supplementary Data 48
</TABLE>
<PAGE> 118
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 119
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 120
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 121
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 122
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 123
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 124
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 125
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 126
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
DESCRIPTION RATE MATURITY DATE AMOUNT VALUE (NOTE 2)
- ----------------------------------- ----- --------------------- ----------- --------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 93.2%
Government National Mortgage
Association*.................... 11.50% 2/15/98 to 2/15/00 $ 10,000 $ 11,090
Government National Mortgage
Association*.................... 11.00% 2/15/98 to 9/20/19 428,000 460,653
Government National Mortgage
Association*.................... 10.50% 12/15/97 to 4/15/21 1,926,000 2,059,573
Government National Mortgage
Association*.................... 10.00% 10/15/98 to 3/15/21 916,000 987,390
Government National Mortgage
Association*.................... 9.50% 3/15/98 to 4/20/06 1,214,000 1,282,817
Government National Mortgage
Association*.................... 9.00% 6/15/01 to 6/15/07 329,000 346,145
Government National Mortgage
Association*.................... 8.50% 10/15/09 to 6/15/26 4,855,000 5,112,117
Government National Mortgage
Association*.................... 8.00% 1/15/20 to 12/15/22 14,536,000 15,017,554
Government National Mortgage
Association*.................... 7.50% 4/15/22 to 12/15/25 19,316,000 19,578,868
Government National Mortgage
Association*.................... 7.00% 12/15/08 to 8/15/25 13,590,000 13,626,640
Government National Mortgage
Association*.................... 6.50% 4/15/26 to 6/15/26 10,599,000 10,234,258
Government National Mortgage
Association*.................... 6.00% 12/15/10 439,000 430,906
-----------
TOTAL INVESTMENTS -- 93.2%
(COST $68,095,936)(a)............. 69,148,011
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 6.8%............... 5,073,978
-----------
NET ASSETS -- 100.0%............... $ 74,221,989
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $74,221,989.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................................... $ 1,237,727
Unrealized depreciation..................................................... (185,652)
-----------
Net unrealized appreciation................................................. $ 1,052,075
=============
</TABLE>
* Mortgage-backed pass-through obligation.
See Notes to Financial Statements.
10
<PAGE> 127
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------------- -------------- ----- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSET-BACKED SECURITIES -- 3.6%
The Money Store Home Equity Trust
Series 1996-B (Cost $1,299,238)...... Aaa/AAA 7.38% 05/15/17 $1,300,000 $ 1,329,822
-----------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 4.7%
Citibank Credit Card Master Trust I
Series 1996-1+....................... Aaa/AAA 0.00% 02/07/03 1,000,000 806,630
Citibank Credit Card Master Trust I
Series 1997-6+....................... Aaa/NR 0.00% 08/15/06 1,500,000 933,925
Prudential Mortgage Cap................ Aaa/AAA 11.58% 12/15/13 3,788 3,788
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST $1,768,188).......... 1,744,343
-----------
CORPORATE BONDS -- 63.8% BANKS -- 15.2%
ABN-AMRO Bank NV....................... Aa2/AA- 7.75% 05/15/23 1,350,000 1,400,248
Chase Manhattan Corp................... A1/A- 8.13% 06/15/02 1,000,000 1,059,248
Comerica Bank.......................... A2/A- 8.38% 07/15/24 1,000,000 1,078,508
Fuji Bank (Cayman), Ltd................ A3/NR 7.30% 03/29/49 1,000,000 1,003,097
Midland Bank PLC....................... A1/A 7.63% 06/15/06 1,000,000 1,044,726
-----------
5,585,827
-----------
BEVERAGES -- 2.6%
Anheuser Busch Cos., Inc............... A1/A+ 7.00% 12/01/25 1,000,000 954,822
-----------
DIVERSIFIED MANUFACTURING -- 2.4%
Allied Signal Corp..................... A2/A 9.50% 06/01/16 719,000 888,759
-----------
ENTERTAINMENT -- 2.7%
Walt Disney Co......................... A2/A 6.75% 03/30/06 1,000,000 1,001,754
-----------
FINANCIAL SERVICES -- 14.8%
Bear Stearns Co., Inc.................. A2/A 6.50% 07/05/00 1,000,000 1,002,840
BHP Finance USA Ltd.................... A2/A 6.42% 03/01/26 1,400,000 1,387,750
Hartford Life, Inc..................... A2/A 6.90% 06/15/04 1,500,000 1,507,258
International Lease Finance Corp....... A1/A+ 6.88% 05/01/01 1,500,000 1,515,777
-----------
5,413,625
-----------
FOOD & KINDRED PRODUCTS -- 5.1%
ConAgra, Inc........................... Baa2/BBB 9.75% 03/01/21 1,500,000 1,879,212
-----------
INSURANCE -- 3.0%
Commercial Credit...................... A1/A+ 7.88% 02/01/05 1,000,000 1,095,508
-----------
RADIO & TV -- 8.3%
British Telecom Finance................ Aa1/AAA 9.63% 02/15/19 1,300,000 1,413,407
Tele-Communications, Inc............... Ba1/BBB- 9.88% 06/15/22 1,400,000 1,637,560
-----------
3,050,967
-----------
RENTAL & LEASE EQUIPMENT -- 2.8%
Hertz Corp............................. A3/A- 7.38% 06/15/01 1,000,000 1,025,980
-----------
RETAIL -- 2.8%
Sears Roebuck Acceptance Corp.......... A2/A- 7.00% 06/15/07 1,000,000 1,002,946
-----------
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 128
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------------- -------------- ----- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
SECURITY BROKER/DEALERS -- 4.1%
Merrill Lynch & Co., Inc............... Aa3/AA- 7.00% 03/15/06 $1,500,000 $ 1,510,899
-----------
TOTAL CORPORATE BONDS (COST $22,462,119) 23,410,299
-----------
MEDIUM TERM NOTES -- 27.1%
AUTOMOBILES -- 6.8%
Ford Motor Credit Co................... A1/A+ 5.75% 01/25/01 1,000,000 978,493
General Motors Acceptance Corp......... A3/A- 6.60% 01/17/01 1,500,000 1,503,996
-----------
2,482,489
-----------
BANKS -- 4.0%
NationsBank Corp....................... A1/A+ 6.09% 12/14/01 1,500,000 1,472,895
-----------
FINANCIAL SERVICES -- 8.2%
Associates Corp. N.A................... Aa3/AA- 6.95% 08/01/02 1,000,000 1,010,659
Countrywide Funding Corp............... A3/A 6.54% 04/14/00 1,000,000 1,001,435
Ikon Capital, Inc...................... A3/A- 6.73% 06/15/01 1,000,000 1,001,120
-----------
3,013,214
-----------
INSURANCE -- 2.6%
UNUM Corp.............................. A1/A+ 5.88% 10/15/03 1,000,000 952,346
-----------
RETAIL STORES -- 2.6%
Penney J.C. & Co....................... A2/A 6.50% 12/15/07 1,000,000 961,656
-----------
UTILITIES -- 2.9%
Pacific Gas & Electric................. A2/A 7.88% 04/08/14 1,000,000 1,056,263
-----------
TOTAL MEDIUM TERM NOTES (COST
$9,824,823)............................ 9,938,863
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------
<S> <C> <C> <C> <C> <C>
TEMPORARY INVESTMENTS -- 1.8%
Temporary Investment Fund............. 327,940 327,940
Temporary Investment Cash Fund........ 327,940 327,940
-----------
TOTAL TEMPORARY INVESTMENTS (COST
$655,880)............................. 655,880
-----------
TOTAL INVESTMENTS -- 101.0% (COST
$36,010,248)(a)....................... 37,079,207
LIABILITIES IN EXCESS OF
ASSETS -- 1.0%........................ (362,580)
-----------
NET ASSETS -- 100.0%................... $36,716,627
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $36,716,627.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................. $1,180,052
Unrealized depreciation.................................. (111,093)
-----------
Net unrealized appreciation.............................. $1,068,959
===========
</TABLE>
+ Zero Coupon Bond.
See Notes to Financial Statements.
12
<PAGE> 129
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $68,095,936).............. $69,148,011
Cash................................................................ 5,165,805
Interest receivable................................................. 448,740
Receivable for capital shares sold.................................. 3,397
Prepaid expenses.................................................... 4,109
-----------
Total Assets.......................................................... 74,770,062
-----------
LIABILITIES:
Dividends Payable................................................... 408,548
Payable for capital shares redeemed................................. 11,536
Investment advisory fees payable.................................... 3,787
Administration fees payable......................................... 1,893
Shareholder service fees payable (A Shares)......................... 15,637
Shareholder service fees payable (K Shares)......................... 140
12b-1 fees payable (K Shares)....................................... 251
Custodian and fund accounting fees payable.......................... 34,497
Transfer agent fees payable......................................... 41,270
Legal fees payable.................................................. 1,924
Other accrued expenses.............................................. 28,590
-----------
Total Liabilities..................................................... 548,073
-----------
NET ASSETS............................................................ $74,221,989
===========
Net Assets
A Shares............................................................ $73,604,908
K Shares............................................................ 617,081
-----------
Total................................................................. $74,221,989
===========
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares............................................................ 7,825,208
K Shares............................................................ 65,573
-----------
Total................................................................. 7,890,781
===========
NET ASSET VALUE
A Shares -- redemption price per share.............................. $9.41
=====
Maximum Sales Charge (A Shares)..................................... 4.50%
Maximum Offering Price (A Shares)
(Net Asset Value of A Shares/(100% -- Maximum Sales Charge))...... $9.85
=====
K Shares -- offering and redemption price per share................. $9.41
COMPOSITION OF NET ASSETS: =====
Shares of common stock, at par...................................... $ 7,891
Additional paid-in capital.......................................... 83,646,252
Distributions in excess of net investment income.................... (532,412)
Accumulated net realized losses on investment transactions.......... (9,951,817)
Net unrealized appreciation on investments.......................... 1,052,075
-----------
NET ASSETS, AUGUST 31, 1997........................................... $74,221,989
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 130
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $36,010,248)................ $37,079,207
Interest Receivable................................................... 669,075
Receivable for capital shares sold.................................... 5,498
Prepaid expenses...................................................... 6,767
-----------
Total Assets............................................................ 37,760,547
-----------
LIABILITIES:
Dividends Payable..................................................... 131,217
Payable for investment securities purchased........................... 803,711
Payable for capital shares redeemed................................... 14,224
Shareholder service fees payable (A and K Shares)..................... 16,065
12b-1 fees payable (K Shares)......................................... 104
Custodian and fund accounting fees payable............................ 18,152
Transfer agent fees payable........................................... 1,390
Legal fees payable.................................................... 650
Other accrued expenses................................................ 58,407
-----------
Total Liabilities....................................................... 1,043,920
-----------
NET ASSETS.............................................................. $36,716,627
===========
Net Assets
A Shares.............................................................. $36,465,009
K Shares.............................................................. 251,618
-----------
Total................................................................... $36,716,627
===========
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares.............................................................. 2,283,075
K Shares.............................................................. 15,751
-----------
Total................................................................... 2,298,826
-----------
NET ASSET VALUE
A Shares -- redemption price per share................................ $15.97
======
Maximum Sales Charge (A Shares)....................................... 4.50%
Maximum Offering Price (A Shares).....................................
(Net Asset Value of A Shares/(100% -- Maximum Sales Charge))........ $16.72
======
K Shares -- offering and redemption price per share................... $15.97
COMPOSITION OF NET ASSETS: ======
Shares of common stock, at par........................................ $ 2,299
Additional paid-in capital............................................ 42,179,214
Accumulated net realized losses on investment transactions............ (6,533,845)
Net unrealized appreciation on investments............................ 1,068,959
-----------
NET ASSETS, AUGUST 31, 1997............................................. $36,716,627
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 131
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.............................................................. $2,641,378
----------
EXPENSES:
Investment advisory fees.............................................. 129,845
Administration fees................................................... 74,198
Shareholder service fees (A Shares)................................... 92,148
Shareholder service fees (K Shares)................................... 609
12b-1 fees (K Shares)................................................. 1,826
Custodian and fund accounting fees.................................... 54,571
Transfer agent fees................................................... 62,588
Legal fees............................................................ 3,220
Other expenses........................................................ 64,206
----------
Total Expenses.................................................. 483,211
Less: Fee waivers................................................... (168,132)
----------
Total Net Expenses...................................................... 315,079
----------
NET INVESTMENT INCOME................................................... 2,326,299
----------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions......................... 37,185
Net change in unrealized appreciation on investments.................. 910,045
----------
Net realized/unrealized gains on investments............................ 947,230
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $3,273,529
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 132
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................... $1,273,712
----------
EXPENSES:
Advisory fees.......................................................... 79,441
Administration fees.................................................... 35,307
Shareholder service fees (A and K Shares).............................. 44,134
12b-1 fees (K Shares).................................................. 587
Custodian and fund accounting fees..................................... 33,541
Transfer agent fees.................................................... 22,133
Legal fees............................................................. 572
Other expenses......................................................... 80,393
----------
Total Expenses....................................................... 296,108
Less: Fee waivers and reimbursements..................................... (132,072)
----------
Total Net Expenses....................................................... 164,036
----------
NET INVESTMENT INCOME.................................................... 1,109,676
----------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions.......................... 219,516
Net change in unrealized appreciation on investments................... 222,337
----------
Net realized/unrealized gain on investments.............................. 441,853
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $1,551,529
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 133
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................... $ 2,326,299 $ 4,945,657
Net realized gain (loss) on investment
transactions...................................... 37,185 (1,656,989)
Net change in unrealized appreciation on
investments....................................... 910,045 682,024
----------- ------------
Change in net assets resulting from operations........ 3,273,529 3,970,692
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
A Shares.......................................... (2,422,154) (4,941,264)
K Shares.......................................... (14,688) (4,394)(a)
Excess of net investment income
A Shares.......................................... -- (183,185)
Tax return of capital
A Shares.......................................... -- (126,969)
K Shares.......................................... -- (712)(a)
----------- ------------
Change in net assets from shareholder distributions... (2,436,842) (5,256,524)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued......................... 5,864,725 8,846,354
Dividends reinvested................................ 1,670,389 3,659,415
Cost of shares redeemed............................. (9,052,270) (25,808,410)
----------- ------------
Change in net assets from capital share
transactions........................................ (1,517,156) (13,302,641)
----------- ------------
Change in net assets.................................. (680,469) (14,588,473)
NET ASSETS
Beginning of Period................................. 74,902,458 89,490,931
----------- ------------
End of Period (including distributions in excess of
$532,412 and $391,623, respectively).............. $ 74,221,989 $ 74,902,458
=========== ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
17
<PAGE> 134
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................. $ 1,109,676 $ 1,877,912
Net realized gains on investment transactions..... 219,516 63,577
Net change in unrealized appreciation on
investments..................................... 222,337 (691,865)
---------------- -----------------
Change in net assets from operations................ 1,551,529 1,249,624
---------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
A Shares........................................ (1,102,953) (1,874,744)
K Shares........................................ (6,723) (3,168)(a)
---------------- -----------------
Change in net assets from shareholder
distributions..................................... (1,109,676) (1,877,912)
---------------- -----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued....................... 7,676,505 8,896,314
Dividends reinvested.............................. 419,354 623,621
Cost of shares redeemed........................... (4,848,577) (8,251,569)
---------------- -----------------
Change in net assets from capital share
transactions...................................... 3,247,282 1,268,366
---------------- -----------------
Change in net assets................................ 3,689,135 640,078
NET ASSETS
Beginning of Period............................... 33,027,492 32,387,414
---------------- -----------------
End of Period..................................... $ 36,716,627 $33,027,492
============== ===============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
18
<PAGE> 135
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I --
Investment Grade Bond Portfolio, at value........................... $71,907,385
Deferred organization costs and prepaid expenses...................... 2,410
-----------
Total Assets............................................................ 71,909,795
-----------
LIABILITIES:
Reports to shareholders expenses payable.............................. 46,269
Fund accounting fees and expenses payable............................. 9,218
Audit fees payable.................................................... 7,622
Transfer agent fees payable........................................... 11,839
Other accrued expenses................................................ 30,216
-----------
Total Liabilities....................................................... 105,164
-----------
NET ASSETS.............................................................. $71,804,631
===========
Net Assets:
A Shares.............................................................. $35,305,694
K Shares.............................................................. 415,143
SRF Shares............................................................ 36,083,794
-----------
Total................................................................... $71,804,631
===========
Shares Outstanding ($0.001 par value, and 300 million shares
authorized):
A Shares.............................................................. 3,678,885
K Shares.............................................................. 43,280
SRF Shares............................................................ 3,359,281
-----------
Total................................................................... 7,081,446
===========
NET ASSET VALUE
A Shares -- redemption price per share................................ $9.60
=====
Maximum Sales Charge (A Shares)....................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge))..................................... $10.05
======
K Shares -- offering and redemption price per share................... $9.59
=====
SRF Shares -- offering and redemption price per share................. $10.74
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par........................................ $ 7,081
Additional paid-in capital............................................ 74,309,647
Distributions in excess of net investment income...................... (10,633)
Accumulated net realized losses on investment transactions............ (2,803,251)
Net unrealized depreciation on investments............................ 301,787
-----------
NET ASSETS, AUGUST 31, 1997............................................. $71,804,631
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 136
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I --
Investment Grade Bond Portfolio:
Interest Income................................................... $ 1,403,839
-----------
Expenses.......................................................... 73,190
Less: Fee waivers and expense reimbursements...................... (42,931)
-----------
30,259
-----------
Net Investment Income from Master Investment Trust,
Series I -- Investment Grade Bond Portfolio....................... 1,373,580
-----------
EXPENSES:
Registration fees................................................. 25,769
Shareholder service fees (A Shares)............................... 36,384
Shareholder service fees (K Shares)............................... 465
Shareholder service fees (SRF Shares)............................. 17,401(a)
12b-1 fees (K Shares)............................................. 938
Administration fees............................................... 32,369
Transfer Agent fees............................................... 22,010
Fund accounting fees and expenses................................. 28,650
Reports to shareholders........................................... 33,866
Amortization of organization costs................................ 15,088
Audit fees........................................................ 6,982
Legal fees........................................................ 718
Directors fees.................................................... 285
Other operating expenses.......................................... 3,103
-----------
Total Expenses.............................................. 224,028
Less: Fee waivers and reimbursements................................ (64,175)
-----------
Total Net Expenses.................................................. 159,853
-----------
NET INVESTMENT INCOME............................................... 1,213,727
-----------
REALIZED / UNREALIZED GAINS (LOSSES) ON INVESTMENTS FROM MASTER
INVESTMENT TRUST, SERIES I -- INVESTMENT GRADE BOND PORTFOLIO
Net realized losses on investment transactions.................... (2,642,763)
Net change in unrealized depreciation on investments.............. 429,712
-----------
Net realized / unrealized losses on investments from Master
Investment Trust Series I -- Investment Grade Bond Portfolio...... (2,213,051)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ (999,324)
===========
</TABLE>
(a) Seafirst Retirement Funds were reorganized into the Pacific Horizon Funds on
June 23, 1997, creating the SRF Shares.
- ---------------
See Notes to Financial Statements.
20
<PAGE> 137
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997(a)
---------------- --------------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.......................... $ 1,213,727 $ 878,883
Net realized loss on investment transactions... (2,642,763) (159,361)
Net change in unrealized depreciation on
investments.................................. 429,712 (86,639)
---------------- --------------------
Change in net assets resulting from
operation.................................... (999,324) 632,883
---------------- --------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares..................................... (826,193) (874,813)
K Shares..................................... (9,753) (4,070)(a)
SRF Shares (b)............................... (392,509) --
Net realized gains from investment
transactions:
A Shares..................................... -- (93,821)
K Shares..................................... -- (7)(a)
SRF Shares (b)............................... -- --
---------------- --------------------
Change in net assets from shareholder
distributions.................................. (1,228,455) (972,711)
---------------- --------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................... 57,743,694 16,917,463
Dividends reinvested........................... 669,060 488,201
Cost of shares redeemed........................ (7,649,365) (6,976,214)
---------------- --------------------
Change in net assets from capital share
transactions................................... 50,763,389 10,429,450
---------------- --------------------
Change in net assets............................. 48,535,610 10,089,622
NET ASSETS
Beginning of Period............................ 23,269,021 13,179,399
---------------- --------------------
End of Period (including distributions in
excess of $10,633 and undistributed net
investment income of $4,095, respectively)... $ 71,804,631 $ 23,269,021
============== ==================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) On June 23, 1997, Bond Fund of Seafirst Retirement Funds withdrew its
investments in Master Investment Trust Series I and merged its assets with
the Intermediate Bond Fund creating a new class of SRF Shares on that date.
See Notes to Financial Statements.
21
<PAGE> 138
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon U.S. Government
Securities Fund (the "U.S. Government Securities Fund"), the Pacific Horizon
Corporate Bond Fund (the "Corporate Bond Fund") and the Pacific Horizon
Intermediate Bond Fund (the "Intermediate Bond Fund"), collectively the "Funds",
individually the "Fund". The Funds offer A Shares, and effective July 22, 1996
began offering K Shares. On June 23, 1997 the Seafirst Bond Fund merged into the
Pacific Horizon Intermediate Bond Fund and the Pacific Horizon Intermediate Bond
Fund began offering SRF Shares. A Shares have a Shareholder Services Plan, K
Shares have a Distribution Plan and Administrative and Shareholder Services
Plan, and the SRF Shares have a Shareholder Services Plan.
The U.S. Government Securities Fund seeks to provide investors with a high
level of current income, consistent with preservation of capital. The U.S.
Government Securities Fund does so by investing primarily in instruments issued
by the Government National Mortgage Association. The Corporate Bond Fund seeks
to provide investors with high current income consistent with reasonable
investment risk. The Corporate Bond Fund invests primarily in a diversified
portfolio of investment grade corporate debt securities. The Intermediate Bond
Fund seeks to achieve its investment objective by investing substantially all of
its assets in the Investment Grade Bond Portfolio (the "Portfolio") of the
Master Investment Trust, Series I (the "Trust"), an open-end management
investment company, that has the same investment objectives as that of the Fund.
The value of the Intermediate Bond Fund's investment in the Portfolio included
in the accompanying Statement of Assets and Liabilities reflects the
Intermediate Bond Fund's proportionate beneficial interest in the net assets of
the Portfolio (58.9% at August 31, 1997). The financial statements of the
Portfolio, including its portfolio of investments, are included elsewhere within
this report and should be read in conjunction with the Intermediate Bond Fund's
financial statements.
Prior to September 1, 1996, the Corporate Bond Fund sought to achieve its
investment objective by investing substantially all of its assets in the
Corporate Bond Portfolio of the Trust, which had the same investment objective
as that of the Fund. Effective September 1, 1996, the Fund withdrew its
investment in the Corporate Bond Portfolio and began investing its assets
directly in investment securities.
22
<PAGE> 139
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI") will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the
23
<PAGE> 140
Funds in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The U.S. Government Securities Fund and the Corporate Bond Fund value
portfolio securities (other than debt securities with remaining maturities of 60
days or less) at the last reported sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
NASDAQ National Securities Market. Securities not listed on an exchange or the
NASDAQ National Securities Market or securities for which there were no
transactions are valued at the mean between the current quoted bid and ask
prices on the date of valuation. Bid price is used when no ask price is
available. The Funds may also use an independent pricing service, approved by
the Board of Directors, to value certain of their 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 Directors. Debt
securities with remaining maturities of 60 days or less are valued at amortized
cost.
The valuation of securities of the Intermediate Bond Fund's investment in
the Portfolio is discussed in Note 2 to the Portfolio's financial statements.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The U.S. Government Securities Fund and Corporate Bond Fund record security
transactions on a trade date basis. Interest income, including accretion of
discount and amortization of premium, is accrued daily. Dividend income is
recognized on the ex-dividend date. Realized gains and losses from security
transactions are recorded on the identified cost basis.
The Intermediate Bond Fund records its share of the investment income,
expenses and realized and unrealized gains and losses recorded by the Portfolio
on a daily basis. The investment income, expenses and realized and unrealized
gains and losses are allocated daily to investors in the Portfolio based upon
the value of their investments in the Portfolio. Such investments are adjusted
on a daily basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and real-
24
<PAGE> 141
ized and unrealized gains and losses are incurred.
The Intermediate Bond Fund incurred certain costs in connection with its
organization. Such costs have been deferred and are being amortized on a
straight-line basis over five years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The U.S. Government Fund's and Corporate Bond Fund's net investment income
is declared daily and paid monthly as a dividend to shareholders of record at
the close of business on record date. Intermediate Bond Fund's net investment
income is declared monthly and paid within five business days after the end of
each month as a dividend to shareholders of record. Net realized gains on
portfolio securities, if any, are distributed at least annually. However, to the
extent net realized gains can be offset by capital loss carryovers of the Funds,
such gains will not be distributed. Dividends and distributions are recorded by
the Funds on the ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
-------------- --------------
<S> <C> <C>
U.S. Government
Securities Fund......... $106,874 $ (6,926)
Corporate Bond Fund...... 66,324 738,059
Intermediate Bond Fund... 4,095 (4,095)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely all of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the U.S. Government Securities Fund, the Corporate
Bond Fund and the Intermediate Bond
25
<PAGE> 142
Fund had the following net capital loss carryovers:
<TABLE>
<CAPTION>
CAPITAL
LOSS
FUND CARRYOVER
- ------------------------------- ----------
<S> <C> <C>
U.S. Government Securities..... $8,325,087 2003
1,663,915 2005
----------
$9,989,002
==========
Corporate Bond Fund............ $ 442,467 1998
5,401,993 1999
882,649 2003
----------
$6,727,109
==========
Intermediate Bond Fund......... $ 160,488 2005
==========
</TABLE>
To the extent that these carryovers are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders.
During the year the Corporate Bond Fund utilized $89,829 of its available
capital loss carryover to offset realized capital gains for federal income tax
purposes, while capital loss carryovers of $738,058 expired.
Capital losses incurred after October 31 for the Funds' are deemed to arise
on the first business day of the following fiscal year for tax purposes. The
Corporate Bond Fund has incurred and elected to defer such capital losses of
$26,252 after October 31, 1996.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The U.S. Government Securities Fund and Corporate Bond Fund have an
Investment Advisory Agreement with Bank of America. For the six months ended
August 31, 1997, the Funds had an Administration Agreement with BISYS and a
Distribution Agreement with the Distributor. Pursuant to the terms of the
Investment Advisory Agreement, Bank of America is entitled to a fee from the
U.S. Government Securities Fund and Corporate Bond Fund, which is accrued daily
and payable monthly, at an annual rate of 0.35% and 0.45% of the U.S. Government
Securities Fund's and Corporate Bond Fund's respective average daily net assets.
For the six months ended August 31, 1997, Bank of America agreed to waive
$105,711 and $79,441 for the U.S. Government Securities Fund and Corporate Bond
Fund, respectively. Pursuant to the terms of the Administration Agreement, BISYS
is entitled to a fee, which is accrued daily and payable monthly, at an annual
rate of 0.20%, 0.15% and 0.15% of the average daily net assets of the U.S.
Government Securities Fund, Corporate Bond Fund, and Intermediate Bond Fund,
respectively. For the six months ended August 31, 1997, BISYS agreed to waive
$61,812, $35,307 and $32,369 of its fee as Administrator for the U.S. Government
Securities Fund, Corporate Bond Fund and Intermediate Bond Fund, respectively.
For the same period, Bank of America and BISYS reimbursed $8,163 of operating
expenses of the Corporate Bond Fund.
For the six months ended August 31, 1997, the Distributor advised the Funds
that it retained $1,993, $1,078, and $504, respectively, from commissions earned
on sales of the U.S. Government Securities Fund, the Corporate Bond Fund and the
Intermediate Bond Fund's shares, respectively. For the same period, Bank of
America and its affiliates advised the Funds that they retained $15,786, $8,452,
and $3,950 from commissions earned on sales of shares of the U.S. Government
Securi-
26
<PAGE> 143
ties Fund, Corporate Bond Fund, and Intermediate Bond Fund, respectively.
The Funds have a Shareholder Services Plan (the "Plan") under which each
Fund pays the Distributor for shareholder servicing expenses incurred in
connection with A Shares of each Fund. Under the Plan, payments for shareholder
servicing expenses may not exceed 0.25% of each Fund's average daily net assets
for A Shares. For the six months ended August 31, 1997, the U.S. Government
Securities Fund, Corporate Bond Fund, and Intermediate Bond Fund incurred
charges of $92,148, $43,835, and $36,384, respectively, pursuant to the Plan.
The Funds were advised that of these amounts, the Distributor retained $5,662,
$25,753, and $9,748, from the U.S. Government Securities Fund, Corporate Bond
Fund, and Intermediate Bond Fund, respectively, and affiliates of Bank of
America retained $83,038, $5,311, and $3,052, respectively. The Plan provides
that if, in any month, the fees paid to the Distributor are less than the costs
incurred by the Distributor, the excess costs will be included in future
computations of the fee, provided that any excess costs will not be carried
forward beyond the end of the fiscal year in which such excess costs were
incurred. For the six months ended August 31, 1997, BISYS waived $8,926 and
$25,683 for the Corporate Bond Fund and Intermediate Bond Fund.
The Funds have adopted a Distribution Plan and an Administrative and
Shareholder Services Plan (the "Administrative Plan") with respect to K Shares
of the Funds. Under the Distribution Plan, the Funds pay the Distributor for
expenses primarily intended to result in the sale of the Funds' K Shares. Under
the Distribution Plan, payments by the Funds for distribution expenses may not
exceed 0.75% of the average daily net assets of each Fund's K Shares. Payments
for distribution expenses under the Distribution Plan are subject to Rule 12b-1
under the Act. Under the Administrative Plan, the Funds pay for expenses
incurred in connection with shareholder services provided by the Distributor and
payments to Service Organizations for the provision of support services with
respect to beneficial owners of K Shares. Under the Administrative Plan,
payments for shareholder services and administrative services may not exceed
0.25% and 0.75%, respectively, of the average daily net assets of each Fund's K
Shares. The total of all payments under the Distribution Plan and the
Administrative Plan may not exceed, in the aggregate, the annual rate of 1.00%
of the average daily net assets of each Fund's K Shares. For the six months
ended August 31, 1997, the U.S. Government Securities Fund, Corporate Bond Fund
and Intermediate Bond Fund incurred charges of $600, $294 and $465,
respectively, pursuant to the Administrative Plan. For the six months ended
August 31, 1997, $609, $235 and $351 of shareholder services and administrative
services were waived by the U.S. Government Securities Fund, Corporate Bond Fund
and Intermediate Bond Fund, respectively.
The Intermediate Bond Fund has a Shareholder Services Plan under which the
Fund pays the Distributor for shareholder
27
<PAGE> 144
servicing expenses incurred in connection with the SRF Shares. Under the
Services Plan, payments for shareholder servicing expenses may not exceed 0.25%
of the Fund's average daily net assets for SRF Shares. For the six months ended
August 31, 1997, Intermediate Bond Fund incurred charges of $17,401, pursuant to
the Services Plan. For the same period $5,772 shareholder servicing fees were
waived by the Intermediate Bond Fund.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $62,588, $22,133, and $22,010 from the
U.S. Government Securities Fund, Corporate Bond Fund, and Intermediate Bond
Fund, respectively, for the six months ended August 31, 1997.
For the six months ended August 31, 1997, the U.S. Government Securities
Fund, Corporate Bond Fund, and Intermediate Bond Fund incurred legal charges
totaling $3,220, $572, and $718, respectively, which were earned by a law firm,
a partner of which serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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 pursuant to the Retirement Plan
amounted to $510
28
<PAGE> 145
and $70 for the U.S. Government Securities
Fund and Intermediate Bond Fund, respectively, for the six months ended August
31, 1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of U.S. Government Securities Fund portfolio securities
(excluding short-term investments) amounted to $- and $6,600,142, respectively.
The cost of purchases and the proceeds from sales of Corporate Bond Fund
portfolio securities (excluding short-term investments) amounted to $16,011,333
and $11,688,577, respectively.
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Funds are summarized below:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued....... 612 $ 5,627 909 $ 8,426
Reinvested... 179 1,657 394 3,657
Redeemed..... (975) (8,995) (2,780) (25,808)
------- --------- ------ --------
Net
decrease..... (184) $ (1,711) (1,477) $(13,725)
======= ========= ====== ========
K Shares
Issued....... 25,378 $ 237,759 44,725 $420,128
Reinvested... 1,474 13,735 244 2,282
Redeemed..... (6,198) (57,663) (50) (465)
------- --------- ------ --------
Net
increase..... 20,654 $ 193,831 44,919(a) $421,945(a)
======= ========= ====== ========
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BOND FUND
--------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------
<S> <C> <C> <C> <C>
A Shares
(000's)
Issued....... 485 $ 7,646 549 $ 8,657
Reinvested... 26 411 40 622
Redeemed..... (305) (4,822) (525) (8,251)
------- --------- ------ --------
Net
increase..... 206 $ 3,235 64 $ 1,028
======= ========= ====== ========
K Shares
Issued....... 1,944 $ 30,782 14,923 $238,773
Reinvested... 490 7,748 135 2,144
Redeemed..... (1,760) (26,691) (35) (561)
------- --------- ------ --------
Net
increase..... 674 $ 11,839 15,023(a) $240,356(a)
======= ========= ====== ========
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
--------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------
<S> <C> <C> <C> <C>
A Shares
(000's)
Issued....... 1,838 $ 17,554 1,730 $ 16,588
Reinvested... 25 242 51 485
Redeemed..... (588) (5,619) (728) (6,976)
------- --------- ------ --------
Net
increase..... 1,275 $ 12,177 1,053 $ 10,097
======= ========= ====== ========
K Shares
Issued....... 23,969 $ 228,806 34,567 $329,738
Reinvested... 1,022 11,043 285 2,728
Redeemed..... (16,562) (158,684) (1) (1)
------- --------- ------ --------
Net
increase..... 8,429 $ 81,165 34,851(a) $332,465(a)
======= ========= ====== ========
SRF Shares
(000's)(b)
Issued....... 3,483 $ 39,843 -- $ --
Reinvested... 35 380 -- --
Redeemed..... (159) (1,718) -- --
------- --------- ------ --------
Net
increase..... 3,359 $ 38,505 -- $ --
======= ========= ====== ========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
29
<PAGE> 146
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(b) 1996 1995 1994
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF PERIOD........................... $ 9.30 $ 9.43 $ 9.31 $ 9.85 $ 10.21
------- ------- ------- ------- --------
Income from Investment Operations:
Net investment income............... 0.32 0.59 0.61 0.55 0.45
Net realized and unrealized gains
losses on investment
transactions...................... 0.10 (0.12) 0.16 (0.54) (0.11)
------- ------- ------- ------- --------
Total income from investment
operations.......................... 0.42 0.47 0.77 0.01 0.34
------- ------- ------- ------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income................. (0.31) (0.59) (0.61) (0.52) (0.45)
Dividends to shareholders from net
realized gains on investment
transactions...................... -- -- (0.01) -- (0.16)
Tax return of capital............... -- (0.01) (0.03) (0.03) (0.09)
------- ------- ------- ------- --------
Total Dividends and Distributions:... (0.31) (0.60) (0.65) (0.55) (0.70)
------- ------- ------- ------- --------
Net change in net asset value per
share............................... 0.11 (0.13) 0.12 (0.54) (0.36)
------- ------- ------- ------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD.............................. $ 9.41 $ 9.30 $ 9.43 $ 9.31 $ 9.85
======= ======= ======= ======= ========
Total return (excludes sales
charge)............................. 4.58%(c) 5.23% 8.47% 0.30% 3.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)... $ 73,068 $ 74,485 $ 89,491 $ 87,354 $157,984
Ratio of expenses to average net
assets............................ 0.85%(d) 0.85% 1.15% 1.15% 0.96%
Ratio of net investment income to
average net assets................ 6.28%(d) 6.11% 6.36% 5.57% 4.45%
Ratio of expenses to average net
assets*........................... 1.30%(d) 1.25%** 1.26%** (a) 1.00%
Ratio of net investment income to
average net assets*............... 6.28%(d) 5.71% 6.28% (a) 4.41%
Portfolio turnover rate***.......... 0% 94% 137% 189% 255%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the
Portfolio received credits from its custodian for interest earned on
uninvested balances which were used to offset custodian fees and expenses.
If such credits had not occurred, the expense ratios would have been as
indicated. The ratio of net investment income was not affected.
*** Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(a) There were no fee waivers or expense reimbursements during the period.
(b) As of July 22, 1996, the Portfolio desiginated the existing series of
shares as "A" Shares.
(c) Not annualized.
(d) Annualized.
See Notes to Financial Statements.
30
<PAGE> 147
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
---------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD............................. $ 9.30 $ 9.22
------ ------
Income from Investment Operations:
Net investment income..................................................... 0.30 0.35
Net realized and unrealized gains on investment transactions.............. 0.10 0.08
------ ------
Total income from investment operations.................................... 0.40 0.43
------ ------
Less dividends to shareholders from net investment income.................. (0.29) (0.35)
------ ------
Net change in net asset value per share.................................... 0.11 0.08
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD................................... $ 9.41 9.30
====== ======
Total return............................................................... 4.35%(b) 4.75%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)......................................... $ 485 $ 418
Ratio of expenses to average net assets................................... 1.34%(c) 1.35%(c)
Ratio of net investment income to average net assets...................... 5.78%(c) 6.11%(c)
Ratio of expenses to average net assets*.................................. 2.04%(c) 2.06%(c)
Ratio of net investment income to average net assets*..................... 5.78%(c) 5.73%(c)
Portfolio turnover rate***................................................. 0% 94%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions
and/or reimbursements had not occurred, the ratios would have been as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the Portfolio received credits from its
custodian for interest earned on uninvested balances which were used to offset custodian fees and expenses.
If such credits had not occurred, the expense ratios would have been as indicated. The ratio of net
investment income was not affected.
*** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Not annualized.
(c) Annualized.
</TABLE>
See notes to financial statements.
31
<PAGE> 148
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
PERIOD
SIX MONTHS OCTOBER 1,
ENDED YEAR ENDED 1994
AUGUST 31, ------------------------------ THROUGH
1997 FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996(a) 1995
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR............................. $ 15.79 $ 16.09 $ 15.03 $ 14.86
-------- -------- -------- --------
Income from Investment Operations:
Net investment income............... 0.50 0.93 0.98 0.45
Net realized and unrealized gains
(losses) on investment
transactions...................... 0.18 (0.30) 1.11 0.17
-------- -------- -------- --------
Total income (loss) from investment
operations.......................... 0.68 0.63 2.09 0.62
-------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income................. (0.50) (0.93) (0.98) (0.45)
Distributions to shareholders from
net realized gains on investment
transactions...................... 0.00 -- (0.05) --
-------- -------- -------- --------
Total Dividends and Distributions.... (0.50) (0.93) (1.03) (0.45)
-------- -------- -------- --------
Net change in net asset value per
share............................... 0.18 (0.30) 1.06 0.17
-------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD.............................. $ 15.97 $ 15.79 $ 16.09 $ 15.03
======== ======== ======== ========
Total return (excludes sales
charge)............................. 4.38%(e) 4.13% 14.12% 4.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)... $ 36,465 $32,842 $32,387 $31,372
Ratio of expenses to average net
assets*........................... 0.92%(d) 1.27% 1.33% 1.04%(d)
Ratio of net investment income to
average net assets*............... 6.29%(d) 6.01% 6.12% 7.32%(d)
Portfolio turnover rate**........... 35% 59% N/A N/A
</TABLE>
- ---------------
* Reflects the Fund's proportionate share of the Portfolio's expenses and fee
waivers and expense reimbursements by the Portfolio's Investment Advisor and
Administrator and the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursement 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 0.75% (annualized) for six months ended August 31, 1997
and 0.61% for the period ended February 29, 1997 and 0.90% (annualized) for
the periods ended February 29, 1996 and February 28, 1995 and 0.16% for the
period ended February 28, 1994, respectively.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) As of July 22, 1996, the Portfolio designated the existing series of shares
as "A" Shares.
(b) Includes the results of operations of Bunker Hill Income Securities, Inc.
and the Fund.
(c) The financial highlights for the years ended September 30, 1993 and 1992 are
for the Bunker Hill Income Securities Inc., a closed end fund.
(d) Annualized.
(e) Not annualized.
See Notes to Financial Statements.
32
<PAGE> 149
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994(b) 1993(c) 1992(c)
-------------- -------------- --------------
<S> <C> <C> <C>
$ 16.94 $ 16.12 $ 15.22
-------- -------- --------
1.58 1.34 1.48
(2.06) 0.82 0.95
-------- -------- --------
(0.48) 2.16 2.43
-------- -------- --------
(1.58) (1.34) (1.53)
(0.02) -- --
-------- -------- --------
(1.60) (1.34) (1.53)
-------- -------- --------
(2.08) 0.82 0.90
-------- -------- --------
$ 14.86 $ 16.94 $ 16.12
======== ======== ========
(2.29%) 7.05% 13.36%
$ 33,046 $ 46,999 $ 44,642
0.91% 1.02% 1.09%
7.85% 8.14% 9.42%
N/A 154.34% 251.97%
</TABLE>
33
<PAGE> 150
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (a)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD............................... $ 15.80 $15.56
------ ------
Income from Investment Operations:
Net investment income........................................................ 0.46 0.53
Net realized and unrealized gains on investment transactions................ 0.17 0.24
------ ------
Total income from investment operations...................................... 0.63 0.77
------ ------
Less Dividends and Distributions:
Dividends to shareholders from net investment income........................ (0.46) (0.53)
Distributions to shareholders from net realized gains on investment
transactions.............................................................. -- --
------ ------
Total Dividends and Distributions............................................ (0.46) (0.53)
------ ------
Net change in net asset value per share...................................... 0.17 0.24
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD..................................... $ 15.97 $15.80
====== ======
Total return................................................................. 4.03%(b) 5.01%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)........................................... $ 252 $ 237
Ratio of expenses to average net assets..................................... 1.47%(c) 1.64%
Ratio of net investment income to average net assets........................ 5.74%(c) 5.60%
Ratio of expenses to average net assets*.................................... 2.17%(c) 2.25%
Ratio of net investment income to average net assets*....................... 5.04%(c) (4.99%)
Portfolio turnover rate**................................................... 35% 59%
</TABLE>
- ---------------
* 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.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
34
<PAGE> 151
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD
AUGUST 31, ------------------------------------------ ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(b) 1996 1995 1994(a)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR....... $ 9.54 $ 9.75 $ 9.44 $ 9.81 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income............................. 0.24 0.52 0.59 0.59 0.08
Net realized and unrealized gain (loss) on
investment transactions......................... 0.09 (0.15) 0.33 (0.37) (0.19)
-------- -------- -------- -------- --------
Total income (loss) from investment operations..... 0.33 0.37 0.92 0.22 (0.11)
-------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income.......................................... (0.24) (0.52) (0.59) (0.59) (0.08)
Dividends to shareholders from net realized gains
on investment transactions...................... (0.03) (0.06) (0.02) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions.................. (0.27) (0.58) (0.61) (0.59) (0.08)
-------- -------- -------- -------- --------
Net change in net asset value per share............ 0.06 (0.21) 0.31 (0.37) (0.19)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD........... $ 9.60 $ 9.54 $ 9.75 $ 9.44 $ 9.81
======== ======== ======== ======== ========
Total return (excludes sales charge)............... 3.52%++ 3.92% 10.45% 2.27% (1.10%)++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)................. $ 35,306 $ 22,937 $ 13,179 $ 1,964 $ 356
Ratio of expenses to average net assets........... 0.83%+ 0.75% 0.27% 0.00% 0.00%+
Ratio of net investment income to average net
assets.......................................... 5.62%+ 5.45% 6.13% 6.43% 5.70%+
Ratio of expenses to average net assets*.......... 1.16%+ 2.26% 5.00% 17.95% 160.20%+
Ratio of net investment income (loss) to average
net assets*..................................... 5.29%+ 3.94% 1.40% (11.52%) (154.50%)+
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
+ Annualized.
++ Not Annualized.
(a) Period from January 13, 1994 (inception date) to February 28, 1994.
(b) As of July 22, 1996 the Fund designated the existing series of shares as "A"
shares.
See Notes to Financial Statements.
35
<PAGE> 152
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
AUGUST 31, ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (a)
-------------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR........................... $ 9.54 $ 9.53
------ ------
Income from Investment Operations:
Net investment income................................................. 0.22 0.31
Net realized and unrealized gain on investments....................... 0.08 0.07
------ ------
Total income from investment operations............................... 0.30 0.38
------ ------
Less Dividends and Distributions:
Dividends to shareholders from net investment income.................. (0.22) (0.31)
Distributions to shareholders from net realized gains on
investments......................................................... (0.03) (0.06)
------ ------
Total Dividends and Distributions...................................... (0.25) (0.37)
------ ------
Net change in net asset value per share................................ 0.05 0.01
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD............................... $ 9.59 $ 9.54
====== ======
Total return........................................................... 3.16%(c) 3.73%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)..................................... $ 415 $ 332
Ratio of expenses to average net assets............................... 1.32%(b) 1.43%(b)
Ratio of net investment income to average net assets.................. 5.12%(b) 5.41%(b)
Ratio of expenses to average net assets*.............................. 1.66%(b) 2.71%(b)
Ratio of net investment income to average net assets*................. 4.78%(b) 4.13%(b)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Annualized.
(c) Non annualized.
See Notes to Financial Statements.
36
<PAGE> 153
[THIS PAGE LEFT INTENTIONALLY BLANK]
37
<PAGE> 154
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
--------------------------
JUNE 23, MARCH 1,
1997 THROUGH 1997 THROUGH YEAR ENDED
AUGUST 31, JUNE 22, ----------------------------------------
1997 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR............... $10.73 $10.70 $10.87 $10.48 $11.00
------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income........... 0.12 0.15 0.57 0.64 0.61
Net realized and unrealized
gain(loss) on investment
transactions.................. -- 0.08 (0.18) 0.39 (0.46)
------ ------ ------ ------ ------
Total income (loss) from
investment operations........... 0.12 0.23 0.39 1.03 0.15
Less Dividends and Distributions:
Dividends to shareholders from
net investment income......... (0.11) (0.16) (0.56) (0.64) (0.61)
Distributions to shareholders
from net realized gains....... -- (0.04) -- -- (0.06)
------ ------ ------ ------ ------
Total Dividends and
Distributions................... (0.11) (0.20) (0.56) (0.64) (0.67)
------ ------ ------ ------ ------
Net change in net asset value per
share........................... 0.01 0.03 (0.17) 0.39 (0.52)
------ ------ ------ ------ ------
NET ASSET VALUE PER SHARE, END OF
PERIOD.......................... $10.74 $10.73 $10.70 $10.87 $10.48
====== ====== ====== ====== ======
Total Return..................... 3.31%++ 2.04%++ 3.74% 9.90% 1.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions).................... $ 36 $ 37 $ 39 $ 47 $ 56
Ratio of expenses to average net
assets........................ 0.95%+ 0.94% 0.95% 0.95% 0.83%
Ratio of net investment income
(loss) to average net
assets........................ 5.62%+ 5.41% 5.21% 5.74% 5.64%
Ratio of expenses to average net
assets*....................... 1.20%+ 1.55% 1.45% 1.56% 1.41%
Ratio of net investment income
to average net assets*........ 5.37%+ 4.80% 4.71% 5.13% 5.06%
Portfolio turnover rate......... 59% N/A N/A N/A N/A
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
++ Not Annualized.
+ Annualized.
(a) Represents activity of the Fund prior to its reorganization from the
Intermediate Bond Fund of Collective Investment Trust for Severest
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.
See Notes to Financial Statements.
38
<PAGE> 155
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-----------------------------
DECEMBER 6, JANUARY 1,
1993 THROUGH 1993 THROUGH YEAR ENDED
FEBRUARY 28, DECEMBER 5, DECEMBER 31,
1994 1993(a) 1992(a)
------------ ------------ ------------
<S> <C> <C> <C>
$11.14 $10.99 $11.01
------ ------ ------
0.12 0.58 0.67
(0.14) 0.15 (0.02)
------ ------ ------
(0.02) 0.73 0.65
(0.12) (0.58) (0.67)
-- -- --
------ ------ ------
(0.12) (0.58) (0.67)
------ ------ ------
(0.14) 0.15 (0.02)
------ ------ ------
$11.00 $11.14 $10.99
====== ====== ======
(0.23)%++ 6.80%++ 6.04%
$ 77 $ 83 $ 74
0.95%+ 0.95%+ 0.95%
4.38%+ 5.60%+ 6.15%
1.79%+ 0.95%+ 0.95%
3.54%+ 5.60%+ 6.15%
N/A 95% 154%
</TABLE>
39
<PAGE> 156
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
S&P/MOODY'S MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ------------- ----- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- 12.8%
AESOP Funding II Series 1997-I, Class
A1................................... Aaa/AAA 6.22% 10/20/01 $2,000,000 $ 1,997,813
Citibank Credit Card Master Trust I
(ZCB)................................ Aaa/AAA 0.00% 08/15/06 2,000,000 1,247,730
Contimortgage Home Equity Loan........ AAA/Aaa 6.60% 10/15/11 2,000,000 1,984,562
Contimortgage Home Equity Loan Trust
1997-3 A5............................ AAA/Aaa 7.01% 08/15/13 2,000,000 2,015,625
Standard Credit Card Master Trust
Series 1995-3, Class A............... AAA/Aaa 7.85% 02/07/02 2,500,000 2.590,613
The Money Store Home Equity Trust
Series 1996-B........................ AAA/Aaa 7.38% 05/15/17 1,000,000 1,019,222
The Money Store, Series 1997-B A5..... AAA/Aaa 6.83% 07/15/21 2,500,000 2,507,055
World Omni Automobile Lease
Securitization Trust, Series 1997-A,
Class A4............................. AAA/Aaa 6.90% 06/25/03 2,250,000 2,280,803
-----------
TOTAL ASSET BACKED SECURITIES (COST $15,684,499) 15,643,623
-----------
CORPORATE BONDS -- 28.2%
Aetna Services Inc.................... A2/A 6.76% 08/15/01 5,500,000 5,534,375
Bear Steams Co........................ A2/A 6.50% 07/05/00 2,000,000 2,002,500
Finova Capital Corp................... Baa 1/A- 6.63% 09/15/01 3,500,000 3,482,500
Ford Motor Credit Co.................. A1/A+ 5.75% 01/25/01 2,000,000 1,955,000
General Motors Acceptance Corp........ A3/A- 7.13% 05/01/01 3,950,000 4,014,187
General Motors Acceptance Corp........ A3/A- 6.88% 07/15/01 2,000,000 2,017,500
Hartford Life, Inc.................... A2/A 6.90% 06/15/04 3,000,000 3,003,750
International Lease Finance Corp...... A1/A+ 6.88% 05/01/01 4,000,000 4,040,000
Merrill Lynch & Co., Inc.............. Aa3/AA- 6.00% 01/15/01 2,000,000 1,970,000
Morgan Stanley Debentures............. A1/A+ 9.38% 06/15/01 4,165,000 4,550,263
Waste Management Inc.................. A3/A- 6.63% 07/15/02 2,000,000 1,990,000
-----------
TOTAL CORPORATE BONDS (COST $34,296,226) 34,560,075
-----------
MEDIUM TERM NOTES -- 19.5%
Associates Corp. of North America
Underwritten Senior Notes............ Aa3/AA- 6.75% 07/15/01 4,100,000 4,125,625
Fuji Bank............................. A3/NR 7.30% 03/29/49 3,000,000 3,018,217
Ikon Capital Inc...................... A3/A- 6.73% 06/15/01 2,500,000 2,503,125
McDonnel Douglas Financial Corp....... A2/AA 6.83% 05/21/01 4,000,000 4,035,000
NationsBank Corp...................... A1/A+ 6.09% 12/14/01 5,000,000 4,887,500
Paine Webber Group, Series C.......... Baa1/BBB+ 7.31% 08/09/00 3,000,000 3,048,750
Sears Roebuck Acceptance Corp......... A2/A- 7.00% 06/15/07 2,200,000 2,202,750
-----------
TOTAL MEDIUM TERM NOTES (COST $23,734,148) 23,820,967
-----------
</TABLE>
See Notes to Financial Statements.
40
<PAGE> 157
<TABLE>
<CAPTION>
MATUITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ----- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.7%
Federal Home Loan Mortgage Corp. Pool
#160034.............................. 8.50% 12/01/07 $ 56,471 $ 59,418
Federal Home Loan Mortgage Corp. Pool
#284343.............................. 8.00% 12/01/16 7,863 8,141
Federal Home Loan Mortgage Corp. Pool
#297505.............................. 8.00% 06/01/17 17,628 18,349
Federal Home Loan Mortgage Corp. Pool
#549837.............................. 8.00% 07/01/10 173,389 180,433
Federal Home Loan Mortgage Corp.
Series #1501 Class G................. 6.40% 05/15/18 2,300,000 2,288,621
Federal National Mortgage Association
Pool #131579......................... 6.50% 07/01/04 114,533 110,489
Federal National Mortgage Association
Pool #286087......................... 9.00% 06/01/24 675,990 697,748
Fncx ppl #303528...................... 6.00% 06/01/01 1,963,425 1,921,089
Government National Mortgage
Association Pool #136688............. 10.00% 09/15/15 25,611 28,432
Government National Mortgage
Association Pool #166744............. 10.00% 07/15/16 258,911 285,207
Government National Association Pool
#209480.............................. 10.00% 07/15/17 78,783 86,785
Government National Mortgage
Association Pool #227082............. 10.00% 08/15/17 111,361 122,671
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.......................... 5,807,383
-----------
U.S. TREASURY OBLIGATIONS -- 32.5%
U.S. Treasury Notes................... 7.75% 01/31/00 18,500,000 19,195,043
U.S. Treasury Notes................... 5.63% 02/28/01 2,700,000 2,656,044
U.S. Treasury Notes................... 5.88% 06/30/00 10,000,000 9,948,999
U.S. Treasury Notes................... 7.00% 07/15/06 7,705,453 7,947,062
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$38,022,147)......................... 39,747,148
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
----------
<S> <C> <C> <C> <C> <C>
TEMPORARY INVESTMENTS -- 2.4%
Temporary Investment Cash Fund........ $1,458,382 $ 1,458,382
Temporary Investment Fund............. 1,466,382 1,466,382
-----------
TOTAL TEMPORARY INVESTMENTS (COST $2,924,766) 2,924,764
-----------
TOTAL INVESTMENTS -- 100.1% (COST $121,839,254)(a) 122,504,493
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1)% (166,158)
-----------
NET ASSETS -- 100.0%.................. $122,338,335
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $122,338,335.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................................... $ 843,444
Unrealized depreciation...................................................... (178,205)
----------
Net unrealized depreciation.................................................. $ 665,239
===========
</TABLE>
(ZCB) Zero Coupon Bond
See Notes to Financial Statements.
41
<PAGE> 158
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $121,839,254)............. $122,504,493
Receivable for securities sold...................................... 2,672,703
Contribution receivable............................................. 297,651
Interest receivable................................................. 1,428,852
Deferred organization costs......................................... 17,243
Prepaid expenses.................................................... 12,014
------------
Total Assets.......................................................... 126,932,956
------------
LIABILITIES:
Withdrawal payable.................................................. 385,769
Payable for securities purchased.................................... 4,122,829
Advisory fees payable............................................... 15,191
Audit fees payable.................................................. 30,315
Fund accounting fees payable........................................ 10,020
Legal fees payable.................................................. 5,989
Administration fees payable......................................... 2,270
Other accrued expenses.............................................. 22,238
------------
Total Liabilities..................................................... 4,594,621
------------
NET ASSETS............................................................ $122,338,335
============
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 159
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest Income........................................................ $4,552,804
----------
EXPENSES:
Advisory fees.......................................................... 279,369
Administration fees.................................................... 35,656
Fund accounting fees and expenses...................................... 54,032
Amortization of organization costs..................................... 6,992
Audit fees............................................................. 16,650
Legal fees............................................................. 6,655
Directors fees......................................................... 3,566
Other operating expenses............................................... 10,017
----------
Total Expenses................................................... 412,937
Less: Fee waivers and reimbursements..................................... (156,639)
----------
Total Net Expenses....................................................... 256,298
----------
NET INVESTMENT INCOME.................................................... 4,296,506
----------
REALIZED/UNREALIZED (LOSSES) ON INVESTMENTS FROM MASTER INVESTMENT TRUST,
SERIES I -- INVESTMENT GRADE BOND PORTFOLIO:
Net realized losses on investment transactions......................... (405,757)
Net change in unrealized depreciation on investments................... 1,294,579
----------
Net realized / unrealized losses on investments........................ 888,822
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $5,185,328
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 160
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................. $ 4,296,506 $ 5,575,868
Net realized gain (loss) on investment
transactions.................................... (405,757) (535,492)
Net change in unrealized depreciation on
investments..................................... 1,294,579 (681,210)
------------ ------------
Change in net assets resulting from operations.... 5,185,328 4,359,166
------------ ------------
TRUST SHARE TRANSACTIONS:
Contributions..................................... 27,755,852 94,643,822
Withdrawals....................................... (49,759,764) (26,135,644)
------------ ------------
Change in net assets resulting from trust share
transactions...................................... (22,003,912) 68,508,178
------------ ------------
Change in net assets................................ (16,818,584) 72,867,344
NET ASSETS
Beginning of Period............................... 139,156,919 66,289,575
------------ ------------
End of Period..................................... $122,338,335 $ 139,156,919
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 161
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
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, 1997, the Trust
consisted of two portfolios. The accompanying financial statements and notes are
those of the Investment Grade Bond Portfolio (the "Portfolio") only.
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.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Portfolio's investment
adviser. The BISYS Group, Inc. through its wholly owned subsidiary, BISYS Fund
Services, Limited Partnership ("BISYS") served as the Portfolio's administrator
thru September 15, 1997. Effective September 15, 1997, PFPC Inc., an indirect
wholly-owned subsidiary of PNC Bank Corp. serves as administrator for the Trust.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
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 securities exchange on which such securities
are primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. The Portfolio may use an
independent pricing service, approved by the Board of Trustees, to value certain
of their securities. Such prices reflect market values which may be established
through the use of electronic
45
<PAGE> 162
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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses on securities transactions are determined on
the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
FEDERAL INCOME TAXES:
The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be taxed on their share
of that Portfolio's ordinary income and capital gains. It is intended that the
Portfolio will be managed in such a way that an investor will be able to satisfy
the requirements of the Internal Revenue Code applicable to regulated investment
companies.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has an Investment Advisory Agreement with Bank of America and
an Administration Agreement with BISYS thru September 15, 1997.
As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, accrued daily and paid monthly,
at an annual rate of 0.45% from March 1, 1997 through June 22, 1997, and 0.30%
from June 23, 1997 through August 31, 1997 of the average daily net assets of
the Portfolio. For the six months ended August 31, 1997, Bank of America waived
$140,896 in fees as Adviser of the Portfolio.
As Administrator, BISYS assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, BISYS was
entitled to a fee which is accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the six months ended
August 31, 1997, BISYS waived $15,473 in fees as Administrator of the Portfolio.
For services provided to two of the portfolios constituting the Trust, each
Trustee receives an annual fee of $3,000 and a meeting fee of $500 per meeting.
For the six months ended August 31, 1997, the Investment Grade Bond
Portfolio incurred legal expenses of $6,655, which
46
<PAGE> 163
was earned by a law firm, a partner of which serves as Secretary of the Trust.
Certain officers of the Trust are affiliated with BISYS. Such persons are
not paid directly by the Trust for serving in these capacities.
NOTE 4 -- SECURITIES TRANSACTIONS
During the six months ended August 31, 1997, the Portfolio purchased and
sold portfolio securities, excluding short-term securities, in the following
amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
U.S. Government..... $48,542,025 $14,952,580
Other............... 30,379,434 80,454,007
----------- -----------
Total............... $78,921,459 $95,406,587
=========== ===========
</TABLE>
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Investment Grade Bond Portfolio had the following concentrations by
industry sector at August 31, 1997 (as a percentage of total investments):
<TABLE>
<S> <C>
Asset-Backed Securities............. 12.8
Corporate Bonds..................... 28.2
Medium Term Notes................... 19.5
Temporary Investments............... 2.4
U.S. Government Agency
Obligations........................ 4.7
U.S. Treasury Notes................. 32.4
-----
100.0%
=====
</TABLE>
47
<PAGE> 164
MASTER INVESTMENT TRUST SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX YEAR ENDED
MONTHS ENDED ------------------------------------------------------------
AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994*
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 0.36%** 0.35% 0.18% 0.25% 0.41%**
Ratio of net
investment income to
average net assets... 6.03%** 5.86% 6.47% 6.22% 4.93%**
Ratio of expenses to
average net
assets(a)............ 0.58%** 0.65% 0.68% 0.75% 0.91%**
Ratio of net
investment income to
average net
assets(a)............ 5.81%** 5.56% 5.97% 5.72% 4.43%**
Portfolio Turnover.... 59% 83% 172% 240% 32%
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
* For the period December 6, 1993 (commencement of operations) through February
28, 1994.
** Annualized.
48
<PAGE> 165
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 166
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
[PACIFIC HORIZON LOGO]
Provident Distributor, Inc., Distributor
TFI-0011 10/97
<PAGE> 167
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
SEMI-ANNUAL REPORT
AUGUST 31, 1997
INTERNATIONAL EQUITY FUND
INVESTING FOR ALL
THE TIMES OF YOUR LIFE
NOT FDIC INSURED
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
<PAGE> 168
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 1
CONTENTS
<TABLE>
<S> <C>
. FUND FACTS 2-3
.
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
.
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
.
. PACIFIC HORIZON INTERNATIONAL
. EQUITY FUND
.
. Portfolio of Investments 10-14
.
. Statement of Assets
. and Liabilities 15
.
. Statement of Operations 16
.
. Statements of Changes
. in Net Assets 17
.
. NOTES TO FINANCIAL STATEMENTS 18-26
.
. FINANCIAL HIGHLIGHTS 27-28
</TABLE>
<PAGE> 2
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 3
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 4
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 5
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 6
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 7
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 8
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 9
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 10
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------ --------- -----------
<S> <C> <C>
COMMON STOCKS--84.1%
ARGENTINA--0.9%
Banco de Galicia ADR................................................... 2,300 $ 68,712
Banco de Galicia y Buenos Aires S.A. de C.V.*.......................... 13,500 101,250
Quilmes Industrial ADR................................................. 9,100 121,712
-----------
291,674
-----------
AUSTRALIA--2.7%
Boral Ltd.............................................................. 15,343 44,692
Broken Hill Proprietary Co. Ltd........................................ 18,002 225,600
Crown Ltd. *........................................................... 160,000 196,050
Goodman Fielder Ltd.................................................... 127,398 182,274
ICI Australia Ltd. 144A................................................ 13,303 123,961
Pioneer International Ltd.............................................. 36,000 120,976
-----------
893,553
-----------
AUSTRIA--0.6%
OMV AG................................................................. 1,400 184,564
-----------
BELGIUM--0.5%
Credit Communal Holding/Dexia.......................................... 1,740 166,217
-----------
BRAZIL--1.5%
Aracruz Cellulose ADR.................................................. 3,500 71,312
Centrais Electricas Brasileiras ADR.................................... 3,550 76,073
Companhia Energetica de Minas Gerais ADR............................... 900 40,468
Companhia Energetica de Minas Gerais................................... 1,485,000 66,801
Petroleo Brasiliero ADR................................................ 3,800 95,350
Telebras ADR........................................................... 1,336 157,648
-----------
507,652
-----------
CANADA--2.1%
Alcan Aluminium Ltd.................................................... 2,700 94,324
Canadian Imperial Bank Of Commerce..................................... 7,300 189,033
Canadian Pacific, Ltd. ADR............................................. 11,200 329,700
CanWest Global Communications Corp. ADR *.............................. 6,100 100,650
-----------
713,707
-----------
CHILE--0.5%
Embotelladora Andina S.A. Series B ADR................................. 3,000 69,375
Embotelladora Andina S.A. ADR.......................................... 300 7,369
Enersis S.A. ADR....................................................... 3,000 106,687
-----------
183,431
-----------
CHINA--0.3%
China Southern Airlines Co. Ltd. ADR................................... 3,200 100,600
-----------
DENMARK--2.0%
Tele Danmark A/S....................................................... 1,800 94,286
Unidanmark A/S......................................................... 10,000 585,156
-----------
679,442
-----------
FINLAND--2.0%
Kesko.................................................................. 10,400 133,093
Metsa Serla-B Shares................................................... 14,500 120,148
Nokia Corp. ADR........................................................ 2,400 186,000
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 11
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------ --------- -----------
<S> <C> <C>
Oy Nokia AB............................................................ 1,600 $ 123,739
Rauma Oy............................................................... 5,000 102,195
-----------
665,175
-----------
FRANCE--7.3%
Assurance Generales de France.......................................... 7,090 253,285
Banque Nationale de Paris.............................................. 6,909 294,590
Credit Commercial de France............................................ 3,900 193,064
Elf Aquitaine.......................................................... 2,100 233,360
Havas S.A.............................................................. 5,692 347,557
PSA Peugeot Citroen.................................................... 1,670 187,226
Remy Cointreau......................................................... 4,880 97,049
Rhone-Poulenc.......................................................... 6,911 253,489
Societe Generale....................................................... 3,135 389,146
Total S.A.............................................................. 1,900 177,979
-----------
2,426,745
-----------
GERMANY--7.0%
Bayer AG............................................................... 10,400 382,645
Degussa AG............................................................. 1,700 82,895
Deutsche Lufthansa AG.................................................. 8,100 163,822
Hornbach Holdings AG................................................... 2,470 171,765
Karstadt AG............................................................ 1,175 406,924
MAN AG................................................................. 1,020 278,639
Mannesmann AG.......................................................... 580 267,069
Metallgesellschaft AG.................................................. 9,300 200,718
ProSieben Media AG 144A *.............................................. 5,520 249,282
Siemens AG............................................................. 2,400 146,950
-----------
2,350,709
-----------
HONG KONG--2.0%
Hutchison Whampoa Ltd.................................................. 19,000 158,133
Hysan Development Co., Ltd............................................. 32,000 92,906
New World Development Co., Ltd......................................... 9,000 56,092
Sun Hung Kai Properties................................................ 9,600 109,009
Swire Pacific Ltd...................................................... 25,000 191,134
Tingyi (Cayman Islands) Holding Co..................................... 270,000 61,666
-----------
668,940
-----------
INDIA--0.2%
Ranbaxy Laboratories Ltd. GDR.......................................... 900 19,057
State Bank of India GDR................................................ 2,000 39,500
-----------
58,557
-----------
INDONESIA--0.9%
Bank Negara Indonesia.................................................. 88,000 28,069
Indonesian Satellite ADR............................................... 7,200 156,150
Jaya Real Property..................................................... 58,000 40,000
Kalbe Farma............................................................ 94,000 60,776
-----------
284,995
-----------
IRELAND--1.7%
Allied Irish Banks PLC................................................. 10,000 84,377
Bank of Ireland........................................................ 6,095 69,460
Jefferson Smurfit Group PLC............................................ 131,000 434,279
-----------
588,116
-----------
ITALY--2.8%
Fiat SPA............................................................... 116,600 357,956
Istituto Bancario San Paolo di Torino.................................. 6,200 43,195
Istituto Bancario San Paolo di Torino 144A............................. 9,600 67,317
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 12
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------ --------- -----------
<S> <C> <C>
Mondadori (Arnoldo) Editore SPA........................................ 24,000 $ 141,376
Telecom Italia SPA..................................................... 54,440 323,156
-----------
933,000
-----------
JAPAN--17.2%
Aisin Seiki Co., Ltd................................................... 20,000 271,546
Asahi Organic Chemicals Industry Co., Ltd.............................. 4,000 16,889
Dai Nippon Printing Co. Ltd............................................ 6,000 125,176
Eisai Co., Ltd......................................................... 15,000 284,378
Exedy Corp............................................................. 14,000 112,311
Fuji Machine Manufacturing Co.......................................... 9,000 309,214
Fukuda Denshi.......................................................... 3,000 51,660
Hitachi Ltd............................................................ 17,000 156,222
Japan Associated Finance............................................... 1,000 53,812
JGC Corp............................................................... 38,000 160,444
Kyudenko Co., Ltd...................................................... 5,000 33,198
Mabuchi Motor.......................................................... 6,000 318,901
Maruichi Steel Tube.................................................... 13,000 188,343
Matsumotokiyoshi....................................................... 5,000 190,413
Matsushita Electric Industrial Co., Ltd................................ 17,000 312,443
Mazda Motor Corporation *.............................................. 94,000 319,066
Meiwa Estate Co., Ltd.................................................. 2,000 38,083
Mitsubishi Heavy Industries, Ltd....................................... 15,000 99,222
Murata Manufacturing Co., Ltd.......................................... 5,000 203,245
Namco Ltd.............................................................. 9,000 303,254
NGK Spark Plug Co...................................................... 11,500 98,063
Nikko Securities Co., Ltd.............................................. 20,000 94,213
Nippon Television Network.............................................. 480 168,093
Okumura................................................................ 10,000 55,882
Otsuka Kagu............................................................ 1,800 120,705
Royal Ltd.............................................................. 4,000 54,971
Sakura Bank Ltd........................................................ 49,000 288,021
Sanwa Bank............................................................. 12,000 149,019
Sawako Corp............................................................ 1,250 11,694
Shimachu............................................................... 5,000 112,592
Sony Music Entertainment, Inc.......................................... 9,000 353,920
Square Co., Ltd........................................................ 3,000 106,549
Sumitomo Rubber Industries............................................. 48,000 277,374
Tokyo Steel Manufacturing.............................................. 3,300 26,801
Toyo Ink Manufacturing................................................. 25,000 76,165
Yamato Kogyo Co., Ltd.................................................. 25,000 217,319
-----------
5,759,201
-----------
MALAYSIA--0.7%
Land & General Holdings................................................ 37,000 27,736
Renong Berhad.......................................................... 27,000 27,725
Resorts World Berhad................................................... 17,000 32,586
Sime Darby Berhad...................................................... 52,000 122,814
Sungei Way Holdings Berhad............................................. 19,000 22,372
-----------
233,233
-----------
MEXICO--2.6%
Corporacion Geo, S.A. de C.V. *........................................ 16,600 100,270
Fomento Economico Mexicano, S.A. de C.V. *............................. 6,700 45,895
Grupo Financiero Bancomer, S.A. de C.V................................. 83,300 51,601
Grupo Televisa S.A. *.................................................. 9,400 154,754
Kimberly Clark de Mexico ADR........................................... 6,000 134,976
Kimberly Clark de Mexico, S.A. de C.V.................................. 50,000 224,907
Panamerican Beverages, Inc. ADR........................................ 5,100 153,319
-----------
865,722
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 13
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------ --------- -----------
<S> <C> <C>
NETHERLANDS--2.3%
AKZO Nobel............................................................. 1,430 $ 221,775
ING Groep N.V.......................................................... 7,043 306,684
Polygram NV............................................................ 4,800 250,581
-----------
779,040
-----------
NEW ZEALAND--1.1%
Air New Zealand Ltd.................................................... 23,000 62,295
Brierley Investments Ltd............................................... 64,000 54,912
Carter Holt Harvey Ltd................................................. 34,000 70,535
Telecom Corp. of New Zealand Ltd. ADR.................................. 4,900 192,631
-----------
380,373
-----------
NORWAY--2.0%
Nycomed ASA............................................................ 13,810 276,488
Saga Petroleum ASA..................................................... 17,800 376,634
-----------
653,122
-----------
PERU--0.2%
Compania de Minas Buenaventura S.A. ADR................................ 3,000 55,500
-----------
PHILIPPINES--0.3%
Philippine Long Distance Telephone Co. ADR............................. 2,400 60,600
Pilipino Telephone Corp. *............................................. 93,000 29,661
-----------
90,261
-----------
SINGAPORE--1.2%
Development Bank of Singapore Ltd...................................... 11,000 116,287
Keppel Fels Ltd........................................................ 22,000 56,399
Keppel Corp. Ltd....................................................... 25,000 89,197
Keppel Land Ltd........................................................ 43,000 111,939
United Overseas Bank Ltd............................................... 4,000 30,922
-----------
404,744
-----------
SPAIN--1.6%
Banco Popular.......................................................... 1,550 346,490
Empressa Nacional de Electricidad, S.A................................. 3,060 61,638
Endesa ADR............................................................. 7,100 143,775
-----------
551,903
-----------
SWEDEN--2.3%
ABB AB................................................................. 5,200 75,693
Nordbanken AB.......................................................... 7,700 244,724
Pharmacia & Upjohn, Inc................................................ 10,200 346,224
Sparbanken Sverige AB, Swedbank........................................ 4,460 96,957
-----------
763,598
-----------
SWITZERLAND--1.2%
Ciba Speciality Chemicals AG *......................................... 30 2,590
Nestle AG.............................................................. 261 303,366
Sulzer AG.............................................................. 132 92,499
-----------
398,455
-----------
THAILAND--0.7%
Bec World Public Co., Ltd.............................................. 10,100 64,474
Land and House Public Co., Ltd......................................... 35,118 39,848
PTT Exploration & Production Public Co., Ltd........................... 4,600 49,031
Siam City Cement Public Co., Ltd....................................... 6,000 20,029
Siam Commercial Bank & Public Co., Ltd................................. 9,500 24,063
Thai Airways International Public Co., Ltd............................. 28,000 32,387
-----------
229,832
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 14
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------ --------- -----------
<S> <C> <C>
UNITED KINGDOM--15.7%
Amersham International PLC............................................. 2,300 $ 71,494
Associated British Foods PLC........................................... 38,000 319,709
Bank of Scotland....................................................... 23,000 155,105
Bass PLC............................................................... 14,000 187,689
Billiton PLC *......................................................... 63,700 247,831
BOC Group PLC.......................................................... 14,063 242,677
Boots Co. PLC.......................................................... 19,600 253,709
British Petroleum Co. PLC.............................................. 29,300 409,667
BTR PLC................................................................ 54,000 190,834
Burmah Castrol PLC..................................................... 18,300 305,409
Carlton Communications PLC............................................. 44,000 350,218
Cookson Group PLC...................................................... 87,896 360,491
De La Rue PLC.......................................................... 8,900 56,773
Guinness PLC........................................................... 34,000 301,213
Johnson Matthey PLC.................................................... 2,300 23,434
PowerGen PLC........................................................... 21,600 273,645
Rank Group PLC......................................................... 65,000 372,484
Reckitt & Colman PLC................................................... 12,000 185,095
Royal & Sun Alliance Group PLC......................................... 14,000 113,476
Royal Bank of Scotland Group........................................... 11,300 107,345
Sainsbury (J) PLC...................................................... 31,000 216,844
Zeneca Group PLC....................................................... 16,500 523,187
-----------
5,268,329
-----------
TOTAL COMMON STOCKS (COST $27,949,389).................................. 28,130,390
-----------
OPTIONS--0.0%
Brazilian Option due 01/16/98 (Cost $1,682)............................ 29 1,339
-----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
----- -------- ----------
<S> <C> <C> <C> <C>
U. S. TREASURY OBLIGATIONS--0.4%
U.S. Treasury Bills............................... 5.10% 10/30/97 100,000 99,134
U.S. Treasury Bills............................... 5.10% 11/20/97 50,000 49,441
-----------
TOTAL U. S. TREASURY OBLIGATIONS (COST $148,598).................................... 148,575
-----------
REPURCHASE AGREEMENTS--15.9%
Paribas, dated 8/29/97, with a maturity value of
$5,324,275 (Collateralized by $5,530,000 U.S.
Treasury Securities, 5.54%, 1/2/98, market
value--$5,529,215) (Cost $5,321,000; Note 2)....... 5.54% 09/02/97 5,321,000 5,321,000
-----------
TOTAL INVESTMENTS--100.4% (COST $33,420,669)(A)..................................... 33,601,304
LIABILITIES IN EXCESS OF ASSETS--(0.4%)............................................. (137,280)
-----------
NET ASSETS--100.0%.................................................................. $33,464,024
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $33,464,024.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................. $ 1,976,111
Unrealized depreciation.................................. (1,795,476)
-----------
Net unrealized appreciation.............................. $ 180,635
===========
</TABLE>
* Represents a non-income producing security.
ADR -- American Depository Receipt.
PLC -- Public Limited Company.
See Notes to Financial Statements.
14
<PAGE> 15
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $28,099,669)............... $28,280,304
Repurchase agreements (cost $5,321,000).............................. 5,321,000
Cash................................................................. 778
Interest and dividend receivable..................................... 38,672
Receivable for capital shares sold................................... 359,357
Receivable for investment securities sold............................ 137,008
Forward currency contracts -
net amount receivable from counterparties.......................... 682
Prepaid expenses..................................................... 41,657
-----------
Total Assets........................................................... 34,179,458
-----------
LIABILITIES:
Payable for capital shares redeemed.................................. 67,222
Payable for securities purchased..................................... 587,158
Net payable for variation margin on futures contracts................ 27,382
Other accrued expenses............................................... 33,672
-----------
Total Liabilities...................................................... 715,434
-----------
NET ASSETS............................................................. $33,464,024
===========
Net Assets
A Shares............................................................. $33,183,523
K Shares............................................................. 280,501
-----------
Total.................................................................. $33,464,024
===========
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares............................................................. 3,161,599
K Shares............................................................. 26,902
-----------
Total.................................................................. 3,188,501
===========
NET ASSET VALUE
A Shares -- Redemption Price Per Share................................. $10.50
======
Maximum Sales Charge (A Shares)...................................... 4.50%
Maximum Offering Price (A Shares)
(Net Asset Value of A Shares/ (100%-Maximum Sales Charge))......... $10.99
======
K Shares -- Offering and Redemption Price Per Share.................... $10.43
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par....................................... $ 3,188
Additional paid-in capital........................................... 32,532,441
Accumulated undistributed net investment income...................... 186,188
Accumulated net realized gains on investment and foreign currency
transactions, forward contracts and futures contracts.............. 489,195
Net unrealized appreciation on investments, forward contracts and
futures contracts.................................................. 251,513
Net unrealized appreciation from foreign currency transactions....... 1,499
-----------
NET ASSETS, AUGUST 31, 1997............................................ $33,464,024
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 16
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $34,250).................... $ 262,368
Interest................................................................. 91,349
--------
353,717
--------
EXPENSES:
Investment advisory fees............................................... 93,847
Custodian and fund accounting fees..................................... 85,888
Shareholder service fees (A and K shares).............................. 31,282
Reports to shareholders................................................ 28,622
Administration fees.................................................... 25,026
Registration fees...................................................... 21,395
Audit fees............................................................. 15,404
Transfer agent fees.................................................... 13,432
Other expenses......................................................... 6,321
Legal fees............................................................. 429
--------
321,646
Less: Fee waivers and expense reimbursements............................. (172,984)
--------
Total Net Expenses....................................................... 148,662
--------
NET INVESTMENT INCOME.................................................... 205,055
--------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gain on investment and foreign currency transactions,
forward contracts and futures contracts.............................. 489,195
Net change in unrealized appreciation on investments, forward contracts
and futures contracts................................................ 239,264
Net change in unrealized depreciation from foreign currency
transactions......................................................... 17,962
--------
Net realized / unrealized gains on investments........................... 746,421
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $ 951,476
========
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 17
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (A)
----------- ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................ $ 205,055 $ 29,109
Net realized gains on investment and foreign currency
transactions, forward contracts and futures
contracts.......................................... 489,195 55,351
Net change in unrealized appreciation on investments,
forward contracts and futures contracts............ 239,264 12,249
Net change in unrealized depreciation on foreign
currency transactions.............................. 17,962 (16,463)
----------- -----------
Change in net assets resulting from operations......... 951,476 80,246
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains on investment transactions:
Class A Shares..................................... (87,952) (14,330)
Class K Shares..................................... (935) (110)
----------- -----------
Change in net assets from shareholder distributions.... (88,887) (14,440)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.......................... 20,572,910 20,137,406
Dividends reinvested................................. 46,648 8,601
Cost of shares redeemed.............................. (4,351,601) (3,878,335)
----------- -----------
Change in net assets from capital share transactions... 16,267,957 16,267,672
----------- -----------
Change in net assets................................... 17,130,546 16,333,478
NET ASSETS:
Beginning of Period.................................. 16,333,478 --
----------- -----------
End of Period (including undistributed net investment
income of $186,188 and distributions in excess of
$18,867, respectively.)............................ $33,464,024 $16,333,478
=========== ===========
</TABLE>
- ---------------
(a) Period from May 13, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
17
<PAGE> 18
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon International
Equity Fund ("the Fund"). The Fund commenced operations on May 13, 1996. The
Fund offers A Shares and, effective July 22, 1996, began offering K Shares. A
Shares have a Shareholder Services Plan while K Shares have a Distribution Plan
and Administrative and Shareholder Services Plan.
The Fund seeks to acheive its investment objective of long-term capital
growth by investing primarily in foreign equity securities.
Prior to September 1, 1996, the Fund sought to achieve its investment
objective by investing substantially all of its assets in the Pacific Horizon
International Equity Portfolio of the Master Investment Trust, Series I (the
"Portfolio"), an open-end management investment company that had the same
investment objective as that of the Fund. Effective September 1, 1996, the Fund
withdrew its investment in the Portfolio and began investing its assets directly
in investment securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating
18
<PAGE> 19
of the Funds' prospectuses and statements of additional information, providing
periodic reports to the Company's Board and providing certain record-keeping
services. Bank of America will bear all fees and expenses charged by PFPC for
such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Fund. The Fund bears all fees and
expenses charged by PFPC for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The securities of the Fund 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 sale price as quoted by their principal exchange on
the date of valuation or, if none is available, at the mean between the current
quoted bid and ask prices on the date of valuation as provided by investment
dealers. Securities for which no market valuations are available are valued in
good faith as determined by the Fund's Board of Directors. Short-term debt
securities with less than 60 days to maturity are valued at amortized cost,
which approximates market value. Trading in foreign securities is generally
completed prior to the end of regular trading on the New York Stock Exchange
(the "Exchange"). Trading may occur in foreign securities on Saturdays and U.S.
holidays and at other times when the Exchange is closed. As a result, there may
be delays in reflecting changes in the market values of foreign securities in
the calculation of net asset value per share of the Fund on days when net asset
value is not calculated and on days which shareholders of the Fund cannot
redeem.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Fund records security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
19
<PAGE> 20
daily. Dividend income is recognized on the ex-dividend date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
Prior to September 1, 1996, the Fund recorded its share of the investment
income, expenses and realized and unrealized gains and losses recorded by the
Master Investment Trust, Series I -- International Equity Portfolio on a daily
basis, based upon the value of its investment in the Portfolio. The fund
incurred certain costs in connection with its organization. Such costs have been
deferred and are being amortized by the fund on a straight line basis over five
years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Fund's net investment income, if any, is declared and paid as a dividend
at least annually to shareholders of record at the close of business on record
date. Net realized gains on portfolio securities, if any, are distributed at
least annually. However, to the extent that net realized gains of the Fund can
be offset by capital loss carryovers of the Fund, such gains will not be
distributed. Dividends and distributions are recorded by the Fund on the
ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with
20
<PAGE> 21
offsetting adjustments made to paid-in-capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
------------- --------------
<S> <C> <C>
International
Equity Fund $ 47,976 $ (47,976)
</TABLE>
FEDERAL INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely all of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
Currency losses incurred after October 31 for the Fund are deemed to arise
on the first business day of the following fiscal year for tax purposes. The
Fund has incurred and will elect to defer such currency losses of $28,470 after
October 31, 1996.
FOREIGN CURRENCY TRANSLATION:
The accounting records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars at the current rate of
exchange to determine the value of investments, assets and liabilities.
Purchases and sales of securities, and income and expenses are translated at the
prevailing rate of exchange on the respective dates of such transactions. The
Fund does not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gains or losses from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities and forward currency contracts, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the amounts
of dividends, interest and foreign withholding amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among other factors, the level of governmental supervision and
regulation of foreign securities markets and the possibilities of political or
economic instability.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
The Fund may enter into forward foreign currency exchange contracts in
connection with purchases or sales of securities to hedge the U.S. dollar value
of portfolio securities denominated in a particular currency. The objective of
the Fund's forward foreign currency hedging transactions is to reduce the risk
that the U.S. dollar value of the Fund's foreign
21
<PAGE> 22
currency denominated securities will decline in value due to changes in foreign
currency exchange rates. All forward foreign currency exchange contracts are
"marked-to-market" daily at the applicable translation rates resulting in
unrealized gains or losses. Realized and unrealized gains or losses are included
in the Statement of Assets and Liabilities and the Statement of Operations.
Realized gains or losses are recorded at the time the forward foreign currency
exchange contract is offset by entering into a closing transaction or by
delivery or receipt of the currency. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
The Fund had the following outstanding forward foreign currency exchange
contracts at August 31, 1997:
<TABLE>
<CAPTION>
VALUE AT
FORWARD FOREIGN SETTLEMENT SETTLEMENT CURRENT UNREALIZED
CURRENCY CONTRACTS DATE DATE VALUE GAIN/(LOSS)
- -------------------------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Purchase Contracts:
Australian Dollar............... 09/04/97 $ 93,732 $ 93,328 $ (404)
Australian Dollar............... 09/30/97 202,580 198,025 (4,555)
Canadian Dollar................. 09/03/97 83,387 83,391 4
Canadian Dollar................. 09/18/97 387,339 387,040 (299)
French Franc.................... 09/30/97 482,987 490,225 7,238
German Marks.................... 09/18/97 473,444 465,849 (7,595)
Italian Lira.................... 09/19/97 124,066 120,217 (3,849)
Spanish Peseta.................. 09/02/97 102,890 102,407 (483)
Spanish Peseta.................. 09/19/97 259,313 265,648 6,335
Swedish Krona................... 09/26/97 228,318 232,562 4,244
UK Pounds....................... 09/02/97 22,034 22,149 115
UK Pounds....................... 09/03/97 7,150 7,179 29
UK Pounds....................... 09/04/97 43,819 43,902 83
---------- ---------- -------
$2,511,059 $2,511,921 $ 863
========== ========== =======
Sale Contracts:
Italian Lira.................... 09/19/97 $ 9,051 $ 9,227 $ (176)
Mexican Peso.................... 09/02/97 7,801 7,805 (4)
---------- ---------- -------
$ 16,852 $ 17,031 $ (180)
========== ========== =======
</TABLE>
FUTURES:
A futures contract is an agreement to purchase or sell a specified quantity
of an underlying instrument at a specified future date, or to make or receive a
cash payment based on the value of a securities index. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" such contract on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Such unrealized gains
22
<PAGE> 23
and losses are included in the caption "Net unrealized appreciation on
investment transactions and futures contracts" in the Statement of Assets and
Liabilities. The Fund agrees to receive from or pay to the broker an amount of
"variation margin" and are included as a payable or receivable in the Statement
of Assets and Liabilities. When the futures contract is closed, the Fund records
a realized gain or loss equal to the difference between the proceeds from (or
cost of) the closing transaction and the Fund's basis in the contract. Such
gains or losses are included in the caption "Accumulated net realized gain on
investment transactions and futures contracts" in the Statement and Assets and
Liabilities. The Fund enters into futures contracts to hedge a portion of its
portfolio.
The use of futures contracts involves, to varying degrees, elements of
market risk. Risks arise from the possible imperfect correlation in movements in
the price of futures contracts, interest rates and the underlying hedged assets,
and the possible inability of counterparties to meet the terms of their
contracts. However, the Fund's activities in futures contracts are conducted
through regulated exchanges which minimize counterparty credit risks.
The Fund had the following open futures contracts at August 31, 1997:
<TABLE>
<CAPTION>
NUMBER CONTRACT EXPIRATION UNREALIZED
OF CONTRACTS VALUE DATE GAIN/(LOSS)
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Purchased:
AUSD All Ordinaries............ 100 $ 188,348 09/30/97 $ (9,538)
Canadian Index................. 500 125,081 09/18/97 36
Canadian Index................. 1000 249,945 09/18/97 (10,444)
France CAC Index............... 800 364,947 09/30/97 (22,282)
Germany DAX Index.............. 200 434,974 09/18/97 (4,128)
Hang-Seng Index (Hong Kong).... 150 269,039 09/29/97 (38,711)
Milan MIB30 Index (Italy)...... 10,000 120,736 09/19/97 17,371
Madrid IBEX Index (Spain)...... 3,000 128,673 09/19/97 (3,973)
Madrid IBEX Index (Spain)...... 3,000 128,673 09/19/97 (5,550)
OMX Index (Sweden)............. 300 92,295 09/26/97 (8,743)
OMX Index (Sweden)............. 400 123,461 09/26/97 (9,773)
---------- --------
Totals....................... $2,226,172 $ (95,735)
========== ========
</TABLE>
The aggregate market value of cash or eligible securities pledged to cover
margin requirements for open futures positions at August 31, 1997 was
$4,428,656.
REPURCHASE AGREEMENTS:
The Fund'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, exceeds the repurchase price. In the
event of the seller's default of the obligation to repurchase, the Fund has the
right to liquidate the collateral and apply the proceeds in satisfaction of the
obligation.
23
<PAGE> 24
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.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement with Bank of America, an
Administration Agreement with BISYS and a Distribution Agreement with the
Distributor. Pursuant to the terms of the Investment Advisory Agreement, Bank of
America is entitled to a fee from the Fund, which is accrued daily and payable
monthly, at an annual rate of 0.75% of the Fund's average daily net assets. For
the six months ended August 31, 1997, Bank of America agreed to waive $93,846
for the Fund. Pursuant to the terms of the Administration Agreement, BISYS is
entitled to a fee from the Fund, which is accrued daily and payable monthly, at
an annual rate of 0.15% of the Fund's average daily net assets. For the six
months ended August 31, 1997, BISYS agreed to waive its fee of $25,026 as
Administrator for the Fund. For the same period, Bank of America reimbursed
$31,083 for operating expenses of the Fund.
For the six months ended August 31, 1997, the Distributor advised the Fund
that it retained $13,448 from commissions earned on sales of the Fund's shares.
For the same period, Bank of America and its affiliates advised the Funds that
they retained $58,503 from commissions earned on sales of shares of the Fund.
The Fund has a Shareholder Service Plan (the "Plan") under which the Fund
pays the Distributor for shareholder servicing expenses incurred in connection
with A Shares of the Fund. Under the Plan, payments for shareholder servicing
expenses may not exceed 0.25% of the Fund's average daily net assets for A
Shares. For the six months ended August 31, 1997, the Fund incurred charges of
$31,001, pursuant to the Plan. The Fund was advised that of these amounts the
Distributor retained $6,301 and affiliates of Bank of America retained $1,787.
The Plan provides that if, in any month, the fees paid to the Distributor are
less than the costs incurred by the Distributor, the excess costs will be
included in future computations of the fee, provided that any excess cost will
not be carried forward beyond the end of the fiscal year in which such excess
costs were incurred. For the six months ended August 31, 1997, BISYS waived
$22,822 of A Shares' shareholder servicing fees.
The Fund has a Distribution Plan and an Administrative and Shareholder
Services Plan (the "Administrative Plan") with respect to K Shares of the Fund.
Under the Distribution Plan, the Fund pays the Distributor for expenses
primarily intended to result in the sale of the Fund's K Shares. Under the
Distribution Plan, payments by the Fund for distribution expenses may not exceed
0.75% of the average daily net assets of the Fund's K Shares. Payments for
distribution expenses under the Distribution Plan are subject to Rule 12b-1
under the Act. Under the Administrative Plan, the
24
<PAGE> 25
Fund pays for expenses incurred in connection with shareholder services provided
by the Distributor and payments to Service Organizations for the provision of
support services with respect to beneficial owners of K Shares. Under the
Administrative Plan, payments for shareholder services and administrative
services may not exceed 0.25% and 0.75%, respectively, of the average daily net
assets of the Fund's K Shares. For the six months ended August 31, 1997, the
Fund incurred charges of $281, pursuant to the plan. The total of all payments
under the Distribution Plan and the Administrative Plan may not exceed, in the
aggregate, the annual rate of 1.00% of the average daily net assets of the
Fund's K Shares. For the six months ended August 31, 1997, BISYS waived $207 in
K Share shareholder servicing fees.
BISYS Ohio serves the Fund as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $13,432 from the Fund for the six months
ended August 31, 1997.
For the six months ended August 31, 1997, the Fund incurred legal charges
totaling $429 which were earned by a law firm, a partner of which serves as
Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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
25
<PAGE> 26
of calculating the payments described above shall be based upon service as a
Director or Chairman after February 28, 1994. Aggregate costs pursuant to the
Retirement Plan amounted to $24 for the Fund, for the six months ended August
31, 1997.
NOTE 5--SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from the sales of the Fund's portfolio securities (excluding short-term
investments) amounted to $13,235,867 and $3,868,569, respectively.
NOTE 6--CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Fund are summarized below:
<TABLE>
<CAPTION>
SIX MONTHS
AUGUST 31, 1997 PERIOD ENDED
(UNAUDITED) FEBRUARY 28, 1997(a)(b)
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
A Shares Issued............... 1,930,686 $20,340,589 2,025,050 $20,020,078
Reinvested.................. 4,248 45,713 856 8,491
Redeemed.................... (409,435) (4,271,039) (389,806) (3,877,701)
--------- ----------- --------- -----------
Net increase.................. 1,525,499 $16,115,263 1,636,100 $16,150,868
========= =========== ========= ===========
K Shares Issued............... 22,425 $ 232,321 11,805 $ 117,328
Reinvested.................. 87 935 11 110
Redeemed.................... (7,361) (80,562) (65) (634)
--------- ----------- --------- -----------
Net increase.................. 15,151 $ 152,694 11,751 $ 116,804
========= =========== ========= ===========
</TABLE>
- ------------------
(a) Period from May 13, 1996 (inception date of Fund) to February 28, 1997, for
the A Shares.
(b) Period from July 22, 1996 (inception date of K Shares) to February 28, 1997,
for the K Shares.
26
<PAGE> 27
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD.... $ 9.91 $ 10.00
------- -------
Income from Investment Operations:
Net investment income........................... 0.07 (0.01)
Net realized and unrealized gains on investment
transactions, forward contracts, foreign
currency transactions and futures contracts... 0.56 (0.07)
------- -------
Total income from investment operations........... 0.63 (0.08)
Distributions to shareholders from net realized
gains on investment transactions................ (0.04) (0.01)
------- -------
Net change in net asset value per share........... 0.59 (0.09)
------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD.......... $ 10.50 $ 9.91
======= =======
Total return (excludes sales charge).............. 6.32%(b) (0.79%)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)............... $33,184 $ 16,217
Ratio of expenses to average net assets......... 1.18%(c) 0.92%(c)
Ratio of net investment income to average net
assets........................................ 1.64%(c) 0.40%(c)
Ratio of expenses to average net assets*........ 2.56%(c) 3.92%(c)
Ratio of net investment income to average net
assets*....................................... 0.26%(c) (2.61%)(c)
Portfolio turnover rate......................... 18%(b) 114%(b)
Average commission rate paid(d)................. $0.0156 $ 0.0353
</TABLE>
- ---------------
* 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.
(a) Period from May 13, 1996 (inception date of fund) to February 28, 1997.
(b) Not annualized.
(c) Annualized.
(d) Represents the dollar amount of commissions paid on Fund transactions
divided by the total number of shares purchased or sold for which
commissions were charged and is calculated on the basis of the Fund as a
whole or without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
27
<PAGE> 28
PACIFIC HORIZON INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 9.88 $ 9.82
------- -------
Income from Investment Operations:
Net investment income (loss)....................... 0.06 (0.01)
Net realized and unrealized gains on investment
transactions, forward contracts, foreign currency
transactions and futures contracts............... 0.53 0.08
------- -------
Total income from investment operations.............. 0.59 0.07
Distributions to shareholders from net realized gains
on investment transactions......................... (0.04) (0.01)
------- -------
Net change in net asset value per share.............. 0.55 0.06
------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 10.43 $ 9.88
======= =======
Total return......................................... 5.93%(b) 0.72%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000).................. $ 280 $ 116
Ratio of expenses to average net assets............ 1.68%(c) 1.49%(c)
Ratio of net investment income to average net
assets........................................... 1.21%(c) (0.31%)(c)
Ratio of expenses to average net assets*........... 3.29%(c) 3.53%(c)
Ratio of net investment income to average net
assets*.......................................... (0.40%)(c) (2.34%)(c)
Portfolio turnover rate............................ 18%(b) 114%(b)
Average commission rate paid(d).................... $0.0156 $ 0.0353
</TABLE>
- ---------------
* 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.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Not annualized.
(c) Annualized.
(d) Represents the dollar amount of commission paid on Fund transactions divided
by the total number of shares purchased or sold for which commissions were
charged and is calculated on the basis of the Fund as a whole or without
distinguishing between the classes of shares issued.
See Notes to Financial Statements.
28
<PAGE> 29
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 30
--------------
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
--------------
[PACIFIC HORIZONS FUNDS LOGO]
Provident Distributor, Inc., Distributor
IEQ-0022 10/97
<PAGE> 31
PACIFIC HORIZON TAXABLE MONEY MARKET FUNDS
SEMI-ANNUAL REPORT
August 31, 1997
Prime Fund
Treasury Fund
Government Fund
Treasury Only Fund
Investing For All
The Times Of Your Life
NOT FDIC INSURED
PACIFIC HORIZON TAXABLE MONEY MARKET FUNDS
<PAGE> 32
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 33
CONTENTS
<TABLE>
<S> <C>
. FUND FACTS 2-3
.
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
.
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
.
. PORTFOLIO OF INVESTMENTS 10-24
.
. Statements of Assets
. and Liabilities 25
.
. Statements of Operations 26
.
. Statements of Changes
. in Net Assets 28-29
.
. Notes to Financial Statements 30-38
.
. Financial Highlights 39-55
</TABLE>
<PAGE> 34
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 35
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 36
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 37
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 38
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 39
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 40
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 41
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 42
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 3.8%
DOMESTIC -- 3.2%
American Express Centurion Bank
Monthly Variable Rate (final
maturity 1/9/98)*.............. A1/P1 5.61% 09/09/97 $ 25,000,000 $ 24,999,318
American Express Centurion Bank
Monthly Variable Rate (final
maturity 4/15/98)*............. A1/P1 5.62% 09/15/97 50,000,000 50,000,000
American Express Centurion Bank
Monthly Variable Rate (final
maturity 6/26/98)*............. A1/P1 5.60% 09/26/97 25,000,000 25,000,000
Bank of New York................. A1/P1 6.10% 05/22/98 25,000,000 24,981,100
Huntington National Bank......... A1/P1 5.94% 08/31/98 50,000,000 49,971,415
PNC Bank, N.A., Monthly Variable
Rate (final maturity
10/01/97)*..................... A1/P1 5.52% 09/02/97 25,000,000 24,998,382
PNC Bank, N.A., Monthly Variable
Rate (final maturity
11/25/97)*..................... A1/P1 5.52% 09/25/97 50,000,000 49,963,450
-------------
TOTAL DOMESTIC BANK NOTES......... 249,913,665
-------------
FOREIGN -- 0.6%
Abbey National Treasury Services,
PLC............................ A1/P1 6.00% 06/17/98 50,000,000 49,997,726
-------------
TOTAL BANK NOTES (AMORTIZED COST
$299,911,391).................... 299,911,391
-------------
CERTIFICATE OF DEPOSIT -- 18.9%
DOMESTIC -- 5.0%
Bankers Trust Company, Daily
Variable Rate (final maturity
07/21/98)*..................... A1/P1 5.65% 09/02/97 25,000,000 24,989,321
Bankers Trust Company, Daily
Variable Rate (final maturity
9/30/97)*...................... A1/P1 5.62% 09/02/97 50,000,000 49,997,695
Bankers Trust Company, Weekly
Variable Rate (final maturity
10/16/97)*..................... A1/P1 5.50% 09/03/97 25,000,000 24,997,139
Bankers Trust Company, Weekly
Variable Rate (final maturity
12/10/97)*..................... A1/P1 5.56% 09/03/97 25,000,000 24,996,575
Bankers Trust Company, Weekly
Variable Rate (final maturity
07/07/98)*..................... A1/P1 5.66% 09/03/97 50,000,000 49,971,403
Crestar Bank..................... A1/P1 5.49% 09/19/97 25,000,000 25,000,000
Crestar Bank..................... A1/P1 5.63% 11/20/97 50,000,000 50,001,644
Crestar Bank..................... A1/P1 5.80% 04/08/98 50,000,000 50,000,000
Crestar Bank..................... A1/P1 5.86% 07/20/98 50,000,000 49,991,561
-------------
Morgan Guaranty Trust Company.... A1/P1 5.80% 07/28/98 25,000,000 24,991,346
Morgan Guaranty Trust Company.... A1/P1 5.87% 08/06/98 25,000,000 24,993,337
-------------
TOTAL DOMESTIC.................... 399,930,021
-------------
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 43
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
EURO -- 0.9%
Sumitomo Bank, Ltd., London...... A1/P1 5.76% 10/15/97 $ 50,000,000 $ 50,000,602
Sumitomo Bank, Ltd., London...... A1/P1 5.77% 10/17/97 25,000,000 25,000,315
--------------
TOTAL EURO........................ 75,000,917
--------------
YANKEE -- 13.0%
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.85% 01/07/98 25,000,000 24,996,564
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.88% 01/13/98 25,000,000 24,998,244
Banque National de Paris,
Chicago........................ A1/P1 5.97% 07/01/98 25,000,000 24,984,140
Banque National de Paris,
Chicago........................ A1/P1 5.89% 07/21/98 25,000,000 24,993,240
Banque National de Paris,
Chicago........................ A1/P1 5.80% 07/31/98 25,000,000 24,989,085
Banque National de Paris, New
York........................... A1/P1 5.75% 02/26/98 25,000,000 24,994,054
BHF Bank of Aktiengesellschaft,
New York, Monthly Variable Rate
(final maturity 8/13/98)*...... A1/P1 5.56% 09/15/97 50,000,000 49,981,553
Canadian Imperial Bank of
Commerce, New York............. A1/P1 5.87% 08/11/98 25,000,000 24,980,849
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.83% 09/02/97 25,000,000 25,000,007
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.94% 12/16/97 55,500,000 55,511,349
Industrial Bank of Japan, New
York........................... A1/P1 5.94% 12/04/97 50,000,000 50,001,267
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/10/97 50,000,000 50,001,356
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/11/97 50,000,000 50,001,369
Istituto Bancario San Paolo Di
Torino, New York............... A1/P1 5.87% 07/20/98 50,000,000 49,987,345
Landesbank Hessen-Thuringen
Girozentrale, New York......... A+/P1 5.94% 06/19/98 25,000,000 24,988,570
National Australia Bank, New
York........................... A1/P1 5.80% 10/03/97 25,000,000 24,999,843
National Bank of Canada, New
York........................... A1/P1 6.15% 05/15/98 44,000,000 43,984,023
National Bank of Canada, New
York........................... A1/P1 6.14% 06/05/98 25,000,000 24,996,188
Royal Bank of Canada, New York... A1/P1 5.58% 12/11/97 25,000,000 24,991,983
Royal Bank of Canada, New York... A1/P1 5.65% 03/03/98 80,000,000 79,942,894
Societe Generale Bank, New York.. A1/P1 5.77% 01/09/98 25,000,000 24,996,590
Societe Generale Bank, New York.. A1/P1 5.59% 11/14/97 30,000,000 30,001,283
Societe Generale Bank, New York.. A1/P1 5.73% 10/15/97 15,000,000 15,002,168
Societe Generale Bank, New York.. A1/P1 5.77% 01/07/98 25,000,000 24,997,481
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 1/15/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,994,305
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 6/16/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,988,571
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 8/25/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,985,793
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 44
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
YANKEE -- (CONTINUED)
Societe Generale Bank, New York,
Quarterly Variable Rate (final
maturity 12/24/97)*............ A1/P1 5.68% 09/24/97 $ 25,000,000 $ 24,994,534
Sumitomo Bank Ltd., New York..... A1/P1 5.60% 09/08/97 25,000,000 24,999,846
Westdeutsche Landes Bank Girozen
Trole, New York................ A1/P1 5.78% 07/31/98 35,000,000 34,992,741
Westpac Banking Corp., New
York........................... A1/P1 5.83% 01/22/98 25,000,000 24,998,125
Westpac Banking Corp., New
York........................... A1/P1 5.93% 08/12/98 25,000,000 24,990,964
---------------
TOTAL YANKEE...................... 1,034,266,324
---------------
TOTAL CERTIFICATE OF DEPOSIT
(AMORTIZED COST
$1,509,197,262).................. 1,509,197,262
---------------
COMMERCIAL PAPER -- 31.5%
DOMESTIC -- 26.9%
ASSET BACKED SECURITIES -- 9.3%
Aesop Funding Corp............... A1/P1 5.52% 09/19/97 33,300,000 33,208,092
Aesop Funding Corp............... A1/P1 5.52% 09/22/97 30,000,000 29,903,400
Aesop Funding Corp............... A1/P1 5.55% 10/02/97 40,000,000 39,808,833
Banc One Funding Corp............ A1/P1 5.53% 10/17/97 37,687,000 37,420,699
Beta Finance Inc................. A1/P1 5.53% 09/24/97 50,000,000 49,823,347
CC USA Inc....................... A1/P1 5.54% 11/05/97 21,500,000 21,284,940
CC USA Inc....................... A1/P1 5.55% 02/02/98 50,000,000 48,812,917
Corporate Asset Funding
Company........................ A1/P1 5.52% 10/17/97 50,000,000 49,647,333
Corporate Asset Funding
Company........................ A1/P1 5.54% 10/27/97 50,000,000 49,569,111
Enterprise Funding Corp. (b)..... A1/P1 5.52% 10/14/97 19,400,000 19,272,089
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 25,364,000 25,109,832
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 44,317,000 43,872,907
Golden Managers Acceptance
Corp........................... A1/P1 5.55% 09/19/97 45,000,000 44,875,125
Gotham Funding Corp.(b).......... A1/P1 5.70% 12/29/97 25,000,000 24,528,958
Riverwood Funding Corp........... A1/P1 5.52% 09/23/97 42,500,000 42,356,633
Riverwood Funding Corp........... A1/P1 5.52% 09/26/97 50,000,000 49,808,333
Sigma Finance Inc................ A1/P1 5.55% 10/14/97 50,000,000 49,668,542
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/04/97 35,000,000 34,655,911
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/05/97 50,000,000 49,500,764
---------------
TOTAL ASSET BACKED SECURITIES..... 743,127,766
---------------
AUTOMOBILES -- 3.5%
American Honda Finance Corp...... F1/P1 5.54% 10/22/97 30,000,000 29,764,550
American Honda Finance Corp...... F1/P1 5.55% 11/07/97 40,000,000 39,586,833
Daimler-Benz North America
Corp........................... A1/P1 5.61% 09/08/97 25,000,000 24,972,729
Daimler-Benz North America
Corp........................... A1/P1 5.51% 11/06/97 50,000,000 49,494,917
Daimler-Benz North America
Corp........................... A1/P1 5.52% 12/03/97 33,908,000 33,424,472
General Motors Acceptance Corp... P1/D1 5.40% 09/12/97 50,000,000 49,917,500
General Motors Acceptance Corp... P1/D1 5.82% 11/05/97 50,000,000 49,474,583
---------------
TOTAL AUTOMOBILES................. 276,635,584
---------------
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 45
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
BANKING -- 3.3%
Bankers Trust, New York, Daily
Variable Rate (final maturity
11/7/97)*...................... A1/P1 5.72% 09/02/97 $ 25,000,000 $ 25,000,000
Bankers Trust, New York, Daily
Variable Rate (final maturity
1/9/98)*....................... A1/P1 5.74% 09/02/97 50,000,000 50,000,000
Svenska Handelsbanken, Inc....... A1/P1 5.52% 12/22/97 49,890,000 49,033,222
Unifunding, Inc.................. A1/P1 5.52% 10/20/97 36,000,000 35,729,520
Unifunding, Inc.................. A1/P1 5.55% 11/18/97 50,000,000 49,398,750
Unifunding, Inc.................. A1/P1 5.56% 12/11/97 50,000,000 49,220,056
--------------
TOTAL BANKING..................... 258,381,548
--------------
BROKERAGE SERVICES -- 3.1%
Lehman Brothers Holdings, Inc.... A1/F1 5.57% 09/19/97 50,000,000 49,860,750
Lehman Brothers Holdings, Inc.... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
Lehman Brothers Holdings, Inc.,
Weekly Variable Rate (final
maturity 4/03/98)*............. A1/F1 5.78% 09/08/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc......... A1/P1 5.53% 12/12/97 25,000,000 24,608,292
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Smith Barney Holdings, Inc....... A1/P1 5.52% 10/06/97 50,000,000 49,731,667
--------------
TOTAL BROKERAGE SERVICES.......... 247,466,716
--------------
CHEMICALS-DIVERSIFIED -- 0.2%
AKZO Nobel Inc................... A1/P1 5.62% 10/10/97 20,000,000 19,878,233
--------------
CONGLOMERATES -- 0.3%
B.A.T. Capital Corp.............. A1/P1 5.62% 09/03/97 25,000,000 24,992,194
--------------
CONSUMER NON-DURABLES -- 1.6%
Newell Co........................ A1/D1 5.54% 09/29/97 40,000,000 39,827,644
Newell Co........................ A1/D1 5.55% 10/29/97 50,000,000 49,552,917
Newell Co........................ A1/D1 5.56% 11/05/97 40,000,000 39,598,444
--------------
TOTAL CONSUMER NON-DURABLES....... 128,979,005
--------------
FINANCE COMPANIES -- 1.7%
Countrywide Home Loans, Inc...... A1/F1 5.63% 09/02/97 34,000,000 33,994,683
Countrywide Home Loans, Inc...... A1/F1 5.60% 09/19/97 25,000,000 24,930,000
Countrywide Home Loans, Inc...... A1/F1 5.52% 10/22/97 50,000,000 49,609,000
Countrywide Home Loans, Inc...... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
--------------
TOTAL FINANCE COMPANIES........... 133,229,204
--------------
INSURANCE -- 0.3%
Marsh & Mclennan Companies,
Inc............................ A1/P1 5.75% 02/20/98 28,000,000 27,230,778
--------------
PUBLISHING -- 0.6%
Tribune Company.................. A1/F1 5.55% 10/22/97 20,000,000 19,842,750
Tribune Company.................. A1/F1 5.65% 12/22/97 25,000,000 24,560,556
--------------
TOTAL PUBLISHING.................. 44,403,306
--------------
RELOCATION SERVICES -- 0.7%
PHH Corporation.................. A1/P1 5.58% 09/19/97 25,000,000 24,930,250
PHH Corporation.................. A1/P1 5.52% 10/31/97 35,000,000 34,678,000
--------------
TOTAL RELOCATION SERVICES......... 59,608,250
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 46
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
SOVEREIGN ISSUES -- 0.6%
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 11/05/97 $ 29,500,000 $ 29,205,451
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 12/03/97 15,700,000 15,475,712
--------------
TOTAL SOVEREIGN ISSUES............ 44,681,163
--------------
UTILITIES -- 1.7%
Duke Capital Corp................ 5.56% 10/06/97 88,955,000 88,473,770
Edison International............. A1/P1 5.60% 10/22/97 50,000,000 49,603,333
--------------
TOTAL UTILITIES................... 138,077,103
--------------
TOTAL DOMESTIC COMMERCIAL PAPER... 2,146,690,850
--------------
FOREIGN -- 4.6%
AIR TRANSPORTATION -- 1.0%
BAA PLC.......................... A1/P1 5.53% 12/03/97 76,410,000 75,318,419
--------------
BUILDING SOCIETY -- 0.9%
Bradford & Bingley Building
Society........................ A1/P1 5.62% 12/29/97 50,000,000 49,071,139
Bradford & Bingley Building
Society........................ A1/P1 5.56% 02/17/98 25,000,000 24,347,472
--------------
TOTAL BUILDING SOCIETY............ 73,418,611
--------------
OIL AND GAS -- 0.5%
Repsol International Finance..... A1/P1 4.98% 09/09/97 40,000,000 39,950,222
--------------
SOVEREIGN ISSUES -- 1.6%
Cades............................ A1/P1 5.39% 10/03/97 50,000,000 49,760,667
Cades............................ A1/P1 5.41% 10/10/97 25,000,000 24,853,479
Cades............................ A1/P1 5.44% 11/14/97 50,000,000 49,440,889
--------------
TOTAL SOVEREIGN ISSUES............ 124,055,035
--------------
TELECOMMUNICATIONS -- 0.6%
Alcatel Alsthom, Inc............. A1/P1 5.60% 12/16/97 50,000,000 49,175,556
--------------
TOTAL FOREIGN COMMERCIAL PAPER.... 361,917,843
--------------
TOTAL COMMERCIAL PAPER (AMORTIZED
COST $2,508,608,693)............. 2,508,608,693
--------------
CORPORATE BOND -- 15.3%
ASSET BACKED SECURITIES -- 2.5%
CC USA, Inc...................... A1/P1 6.18% 05/26/98 20,000,000 20,002,393
Ciesco, L.P., Monthly Variable
Rate (final maturity
2/10/98)*...................... A1/P1 5.57% 09/12/97 75,000,000 74,996,671
Sigma Finance, Inc................ A1/P1 5.92% 03/05/98 50,000,000 49,991,984
Sigma Finance, Inc., Daily
Variable Rate (final maturity
7/27/98)*........................ A1/P1 5.68% 09/02/97 50,000,000 49,999,104
--------------
TOTAL ASSET BACKED SECURITIES..... 194,990,152
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 47
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
AUTOMOBILES -- 2.3%
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/6/98)*.............. F1/P1 5.79% 10/06/97 $ 50,000,000 $ 49,994,265
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/9/98)*.............. F1/P1 5.75% 10/09/97 24,000,000 24,001,339
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 7/27/98)*............. F1/P1 5.72% 10/27/97 45,000,000 45,000,000
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 6/16/98)*............. F1/P1 5.81% 06/16/98 20,000,000 20,000,000
Ford Motor Credit Corp........... A1/P1 7.13% 12/01/97 25,000,000 25,089,658
General Motors Acceptance Corp.,
Quarterly Variable Rate (final
maturity 1/20/98)*............. F1/D1 5.82% 10/20/97 20,000,000 20,004,971
-------------
TOTAL AUTOMOBILES................. 184,090,233
-------------
BANKING -- 0.6%
Compagnie Bancaire USA Funding,
Daily Variable Rate (final
maturity 5/15/98)*............. A1/P1 5.79% 09/02/97 50,000,000 49,996,031
-------------
BROKERAGE SERVICES -- 4.5%
Bear Stearns Companies, Inc.,
Series B, Daily Variable Rate
(final maturity 3/17/98)*...... A1/P1 5.70% 09/02/97 75,000,000 75,000,000
Bear Stearns Companies, Inc.,
Series B, Monthly Variable Rate
(final maturity 4/1/98)*....... A1/P1 5.78% 09/02/97 18,000,000 18,015,439
C. S. First Boston, Inc., Daily
Variable Rate (final maturity
7/21/98)*...................... A1/P1 5.67% 09/02/97 50,000,000 50,000,000
C. S. First Boston, Inc., Weekly
Variable Rate (final maturity
5/15/98)*...................... A1/P1 5.61% 09/03/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
11/20/97)*..................... A1/P1 5.56% 09/03/97 50,000,000 49,997,874
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
1/29/98)*...................... A1/P1 5.59% 09/03/97 50,000,000 49,995,999
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
3/4/98)*....................... A1/P1 5.61% 09/03/97 19,000,000 18,985,204
Merrill Lynch & Co., Inc.,
Quarterly Variable Rate (final
maturity 11/13/97)*............ A1/P1 5.68% 11/13/97 50,000,000 49,997,008
-------------
TOTAL BROKERAGE SERVICES.......... 361,991,524
-------------
CONGLOMERATES -- 0.3%
Philip Morris Co., Inc............ A1/P1 9.00% 05/15/98 22,625,000 23,054,018
-------------
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 48
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
---------------------------------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
FINANCE COMPANIES -- 2.1%
Associates Corp., North America.. A1/P1 6.63% 11/15/97 $ 20,000,000 $ 20,037,809
CIT Group Holdings, Inc.......... A1/P1 7.00% 09/30/97 29,700,000 29,728,947
Dean Witter Discover & Co........ A1/P1 6.00% 03/01/98 15,000,000 15,009,675
Household Finance Corp., Daily
Variable Rate (final maturity
5/28/98)*...................... A1/P1 5.72% 09/02/97 50,000,000 50,000,000
Household Finance Corp., Monthly
Variable Rate (final maturity
9/15/98)*...................... A1/P1 5.70% 09/15/97 50,000,000 50,043,350
-------------
TOTAL FINANCE COMPANIES........... 164,819,781
-------------
LEASING -- 1.8%
Sanwa Business Credit Corp.,
Daily Variable Rate (final
maturity 4/17/98)*............. P1/D1 5.84% 09/02/97 25,000,000 25,000,000
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 12/08/97)*............ P1/D1 5.80% 09/08/97 30,000,000 30,011,824
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 4/29/98)*............. P1/D1 5.76% 09/29/97 25,000,000 25,013,500
Sanwa Business Credit Corp.,
Quarterly Variable Rate (final
maturity 2/6/98)*.............. P1/D1 5.72% 11/06/97 25,000,000 24,998,918
USL Capital Corp., Series D,
Quarterly Variable Rate (final
maturity 4/22/98)*............... P1/F1 5.83% 10/22/97 34,000,000 34,022,741
-------------
TOTAL LEASING..................... 139,046,983
-------------
RELOCATION SERVICES -- 0.6%
PHH Corporation, Monthly Variable
Rate (final maturity
6/24/98)*...................... A1/P1 5.63% 09/24/97 50,000,000 50,000,000
-------------
RETAILING -- 0.6%
Sears Roebuck Acceptance Corp.... P1/F1 5.74% 10/02/97 50,000,000 49,999,569
-------------
TOTAL CORPORATE BOND (AMORTIZED
COST $1,217,988,291)............. 1,217,988,291
-------------
MASTER NOTE -- 7.5%
Goldman Sachs Group L.P. (final
maturity 1/16/98)*............. A1/P1 5.83% 09/02/97 300,000,000 300,000,000
Morgan Stanley Group, Inc. (final
maturity 3/24/98)*............. A1/P1 5.79% 09/02/97 300,000,000 300,000,000
-------------
TOTAL MASTER NOTE (AMORTIZED COST
$600,000,000).................... 600,000,000
-------------
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 49
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(C) -- 23.6%
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $50,833,610
(Collateralized by $50,930,000
various U.S. Government
Obligations, 6.15%-7.55%,
1/27/00 -- 6/10/04, market
value -- $51,819,652)............ 5.60% 09/02/97 $ 50,802,000 $ 50,802,000
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $80,049,956
(Collateralized by $80,725,000
U.S. Government Obligations,
6.40%-6.50%, 5/2/01 -- 2/25/02,
market value -- $81,602,028)..... 5.62% 09/02/97 80,000,000 80,000,000
First Chicago Capital Markets,
Inc., dated 8/29/97, with a
maturity value of $150,093,833
(Collateralized by $157,483,000
various U.S. Government
Obligations, 0.00% -- 7.89%,
9/11/97 -- 8/15/03, market
value -- $153,001,916)........... 5.63% 09/02/97 150,000,000 150,000,000
First National Bank of Chicago,
dated 8/29/97, with a maturity
value of $50,031,278
(Collateralized by $51,390,000
Federal National Mortgage
Association Note, 7.02%, 8/28/07,
market value -- $51,004,575)..... 5.63% 09/02/97 50,000,000 50,000,000
Fuju Securities, Inc., dated
8/29/97, with a maturity value of
$300,187,000 (Collateralized by
$318,677,000 various U.S.
Government Obligations, 0.00% --
10.35%, 9/4/97 -- 8/15/26, market
value -- $306,000,902)........... 5.61% 09/02/97 300,000,000 300,000,000
HSBC Securities, Inc., dated
8/29/97, with a maturity value of
$350,218,556 (Collateralized by
$351,407,000 various U.S.
Government Obligations, 0.00%-
9.25%, 9/2/97 -- 6/15/07, market
value -- $357,001,503)........... 5.62% 09/02/97 350,000,000 350,000,000
Lehman Brothers, Inc., dated
8/29/97, with a maturity value of
$41,031,969 (Collateralized by
$69,764,000 U.S. Treasury Notes,
0.00%, 8/15/03 -- 11/15/08,
market value -- $41,828,863)..... 5.48% 09/02/97 41,007,000 41,007,000
</TABLE>
- ---------------
See Notes to Financial Statements.
17
<PAGE> 50
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(C) -- (CONTINUED)
Merrill Lynch Securities, dated
8/29/97, with a maturity value of
$100,062,444 (Collateralized by
$115,399,948 Federal National
Mortgage Association Notes,
5.50% -- 9.00%, 3/1/03 -- 9/1/26,
market value -- $102,002,243).... 5.62% 09/02/97 $100,000,000 $ 100,000,000
NationsBanc, Inc., dated 8/29/97,
with a maturity value of
$230,143,750 (Collateralized by
$233,746,164 various U.S.
Government Obligations, 0.00% --
9.50%, 9/2/97 -- 8/1/27, market
value -- $234,600,486)........... 5.63% 09/02/97 230,000,000 230,000,000
Nomura Securities, Inc., dated
8/29/97, with a maturity value of
$200,124,667 (Collateralized by
$265,004,426 Government National
Mortgage Association Notes,
6.00% -- 10.00%,
1/1/00 -- 8/20/27, market
value -- $204,000,000)........... 5.61% 09/02/97 200,000,000 200,000,000
Prudential Securities, Inc., dated
8/29/97, with a maturity value of
$250,155,556 (Collateralized by
$324,844,908 various U.S.
Government Obligations, 0.00%-
10.00%, 1/15/98 -- 8/1/27, market
value -- $255,000,250)........... 5.60% 09/02/97 250,000,000 250,000,000
Smith Barney, Inc., dated 8/29/97,
with a maturity value of
$80,049,778 (Collateralized by
$117,897,650 various U.S.
Government Obligations,0.00% --
8.00%, 7/15/08 -- 2/1/27, market
value -- $81,600,397)............ 5.60% 09/02/97 80,000,000 80,000,000
--------------
TOTAL REPURCHASE AGREEMENT
(AMORTIZED COST
$1,881,809,000).................. 1,881,809,000
--------------
TOTAL INVESTMENTS -- 100.6%
(AMORTIZED COST
$8,017,514,637)(A)............... 8,017,514,637
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.6%)................. (45,980,584)
--------------
NET ASSETS -- 100.0%.............. $7,971,534,053
==============
</TABLE>
- ---------
Percentages indicated are based on net assets of $7,971,534,053.
(a) Cost for federal income tax and financial reporting purposes are
substantially the same.
(b) Private placement security.
(c) The range of coupon rates and maturity dates are shown.
PLC -- Public Liability Company.
N.R.S.R.O. Nationally Recognized Statistical Ratings Organization. Rating
agencies that are included within the N.R.S.R.O. category are: S&P,
Moody's, Fitch Investors Services, Duff & Phelps, IBCA, and Thomsons
Bank Watch.
A1 -- Highest rating assigned by S&P and IBCA.
P1 -- Highest rating assigned by Moody's.
F1 -- Highest rating assigned by Fitch Investors.
D1 -- Highest rating assigned by Duff.
TBW1 -- Highest rating assigned by Thomsons Bank Watch.
Note: S&P and Moody's ratings have been used, unless another service has
assigned the security a higher rating.
* Variable rate security. Maturity date reflects the next interest rate change
date.
See Notes to Financial Statements.
18
<PAGE> 51
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- ----------------------------------------------- ---- -------- ------------ --------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 40.9%
U.S. Treasury Note............................ 5.75% 09/30/97 $225,000,000 $ 225,035,616
U.S. Treasury Note............................ 8.75% 10/15/97 85,000,000 85,306,286
U.S. Treasury Note............................ 5.63% 10/31/97 75,000,000 74,996,423
U.S. Treasury Note............................ 7.38% 11/15/97 125,000,000 125,433,922
U.S. Treasury Note............................ 5.00% 01/31/98 50,000,000 49,868,354
U.S. Treasury Note............................ 5.63% 01/31/98 25,000,000 24,994,602
U.S. Treasury Note............................ 7.25% 02/15/98 125,000,000 125,862,200
U.S. Treasury Note............................ 5.13% 02/28/98 125,000,000 124,721,871
U.S. Treasury Note............................ 6.13% 03/31/98 100,000,000 100,290,389
U.S. Treasury Note............................ 7.88% 04/15/98 75,000,000 76,020,454
U.S. Treasury Note............................ 6.13% 05/15/98 25,000,000 25,076,923
-------------
TOTAL U.S. TREASURY OBLIGATIONS (AMORTIZED COST
$1,037,607,040)............................... 1,037,607,040
-------------
REPURCHASE AGREEMENTS(B) -- 46.5%
Barclays de Zoete Wedd Securities, Inc., dated
8/29/97, with a maturity value of $32,477,835
(Collateralized by $34,185,000 various U.S.
Treasury Securities, 0.00%-6.38%, 8/20/98-
8/15/27, market value -- $33,107,529)......... 5.50% 09/02/97 32,458,000 32,458,000
Barclays de Zoete Wedd Securities, Inc., dated
8/29/97, with a maturity value of $150,092,667
(Collateralized by $148,374,000 various U.S.
Treasury Securities, 0.00%-8.13%, 5/15/00-
8/15/27, market value -- $153,000,376)........ 5.56% 09/02/97 150,000,000 150,000,000
CIBC Wood Gundy Securities, Inc., dated
8/29/97, with a maturity value of $100,061,667
(Collateralized by $100,300,000 various U.S.
Treasury Securities, 4.75%-6.88%, 10/31/98-
8/15/25, market value -- $102,001,360)........ 5.55% 09/02/97 100,000,000 100,000,000
C. S. First Boston Corp., dated 8/29/97, with a
maturity value of $100,061,444 (Collateralized
by $102,600,000 U. S. Treasury Note, 5.88%,
2/15/00, market value -- $102,509,208)........ 5.53% 09/02/97 100,000,000 100,000,000
Dean Witter Reynolds, Inc., dated 8/29/97, with
a maturity value of $100,061,667
(Collateralized by $108,650,000 various U.S.
Treasury Securities, 0.00%-7.50%,
9/30/97-8/15/12, market
value -- $102,000,208)........................ 5.55% 09/02/97 100,000,000 100,000,000
Goldman Sachs, & Co., dated 8/29/97, with a
maturity value of $150,092,500 (Collateralized
by $149,453,000 U.S. Treasury Notes, 5.88%-
6.88%, 3/31/99-7/31/99, market value --
$153,000,041)................................. 5.55% 09/02/97 150,000,000 150,000,000
HSBC Securities, Inc., dated 8/29/97, with a
maturity value of (Collateralized by
$244,109,000 various U.S. Treasury Notes,
0.00%, 11/15/97-5/15/12, market value --
$153,000,207)................................. 5.57% 09/02/97 150,000,000 150,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 52
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- ----------------------------------------------- ----- -------- --------- --------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(B) -- (CONTINUED)
J.P. Morgan Securities, Inc., dated 8/29/97,
with a maturity value of $100,061,778
(Collateralized by $88,596,000 various U.S.
Treasury Securities, 0.00%-12.50%,
12/11/97-8/15/14, market
value -- $102,000,419)........................ 5.56% 09/02/97 $100,000,000 $ 100,000,000
Nomura Securities International, Inc., dated
8/29/97, with a maturity value of $150,092,667
(Collateralized by $151,360,000 U.S. Treasury
Securities, 5.13%-6.88%, 1/15/00-8/15/25,
market value -- $153,000,504)................. 5.56% 09/02/97 150,000,000 150,000,000
Smith Barney, Inc., dated 8/29/97, with a
maturity value of $150,092,667 (Collateralized
by $157,223,000 various U.S. Treasury
Securities, 0.00%-13.88%, 5/31/98-2/15/27,
market value $153,000,711).................... 5.56% 09/02/97 150,000,000 150,000,000
--------------
TOTAL REPURCHASE AGREEMENTS
(COST $1,182,458,000)......................... 1,182,458,000
--------------
TOTAL INVESTMENTS -- 87.4%
(AMORTIZED COST $2,220,065,040)(A)............ 2,220,065,040
OTHER ASSETS IN EXCESS OF LIABILITIES --
12.6%......................................... 319,151,789
--------------
NET ASSETS -- 100.0%........................... $2,539,216,829
==============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $2,539,216,829.
(a) Cost for federal income tax and financial reporting purpose are
substantially the same.
(b) The range of coupon rates and maturity dates for collateral are shown.
See Notes to Financial Statements.
20
<PAGE> 53
PACIFIC HORIZON GOVERNMENT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------------------- ---- -------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 52.3%
U.S. GOVERNMENT AGENCY OBLIGATIONS
(DISCOUNT) -- 13.7%
Federal Home Loan Bank........................... 5.49%+ 09/04/97 $2,573,000 $ 2,571,823
Federal Home Loan Bank........................... 5.62%+ 11/13/97 5,000,000 4,943,019
Federal Home Loan Mortgage Corporation........... 5.49%+ 09/02/97 4,873,000 4,872,257
Federal Home Loan Mortgage Corporation........... 5.49%+ 09/03/97 8,000,000 7,997,562
Federal Home Loan Mortgage Corporation........... 5.48%+ 09/04/97 12,401,000 12,395,335
Federal Home Loan Mortgage Corporation........... 5.49%+ 09/05/97 10,000,000 9,993,900
Federal Home Loan Mortgage Corporation........... 5.59%+ 11/14/97 8,846,000 8,744,355
Federal National Mortgage Association............ 5.49%+ 09/25/97 6,525,000 6,501,119
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(DISCOUNT)....................................... 58,019,370
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
(FIXED) -- 24.1%
Federal Farm Credit Bank......................... 5.54% 03/02/98 5,000,000 5,000,000
Federal Home Loan Bank........................... 6.00% 09/30/97 3,825,000 3,825,370
Federal Home Loan Bank........................... 5.72% 07/21/98 10,000,000 9,997,053
Federal Home Loan Mortgage Corporation........... 5.52% 11/06/97 3,000,000 2,999,754
Federal National Mortgage Association............ 7.09% 10/14/97 5,305,000 5,313,218
Federal National Mortgage Association............ 5.53% 10/29/97 10,000,000 9,996,465
Federal National Mortgage Association............ 5.45% 11/06/97 15,000,000 14,996,069
Federal National Mortgage Association............ 6.05% 11/10/97 2,000,000 2,001,316
Federal National Mortgage Association............ 6.02% 04/15/98 5,000,000 5,010,824
Federal National Mortgage Association............ 5.71% 06/23/98 10,000,000 9,996,259
Federal National Mortgage Association............ 7.00% 07/13/98 5,000,000 5,048,149
Federal National Mortgage Association............ 5.63% 08/14/98 5,000,000 4,991,349
Federal National Mortgage Association............ 5.71% 09/09/98 5,000,000 4,992,800
Student Loan Marketing Association............... 5.80% 10/01/97 3,000,000 3,000,000
Student Loan Marketing Association............... 5.60% 10/24/97 5,000,000 4,999,223
Student Loan Marketing Association............... 5.44% 12/19/97 10,000,000 9,995,334
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(FIXED).......................................... 102,163,183
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
(VARIABLE) -- 14.5%
Federal Home Loan Bank, Daily Variable Rate (final
maturity 11/18/97)*.............................. 6.00% 09/02/97 5,000,000 5,003,971
Federal National Mortgage Association, Daily
Variable Rate (final maturity 1/15/98)*.......... 5.66% 09/02/97 20,000,000 19,995,963
Federal National Mortgage Association, Monthly
Variable Rate (final maturity 12/3/97)*.......... 5.47% 09/03/97 20,000,000 19,996,527
Federal National Mortgage Association, Weekly
Variable Rate (final maturity 6/24/98)*.......... 5.50% 09/03/97 6,000,000 5,994,260
</TABLE>
- ---------------
See Notes to Financial Statements.
21
<PAGE> 54
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------------------- ---- -------- --------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (VARIA-
BLE) -- (CONTINUED)
Student Loan Marketing Association, Weekly
Variable Rate (final maturity 1/21/98)*.......... 5.61% 09/03/97 $8,750,000 $ 8,754,471
Student Loan Marketing Association, Weekly
Variable Rate (final maturity 2/17/98)*.......... 5.56% 09/03/97 2,000,000 2,000,799
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(VARIABLE)....................................... 61,745,991
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(AMORTIZED COST $221,928,544).................... 221,928,544
------------
COMMERCIAL PAPER -- 9.0%
Downey Savings & Loan Association, LOC: Federal
Home Loan Bank of San Francisco.................. 5.52% 09/22/97 5,000,000 4,983,900
USA Group Secondary Market Services, Inc., LOC:
Student Loan Marketing Association............... 5.48% 09/19/97 15,000,000 14,958,900
Western Financial Savings Bank, LOC: Federal Home
Loan Bank of San Francisco....................... 5.57% 09/03/97 18,000,000 17,994,430
------------
TOTAL COMMERCIAL PAPER (AMORTIZED COST
37,937,230)...................................... 37,937,230
------------
REPURCHASE AGREEMENTS (B) -- 41.1%
CIBC Wood Gundy Securities, Inc., dated 8/29/97,
with a maturity value of $14,206,834
(Collateralized by $13,635,000 U.S. Government
Obligations, 7.55%-7.88%, 6/10/04 -- 2/24/05,
market value -- $14,482,620)..................... 5.60% 09/02/97 14,198,000 14,198,000
CIBC Wood Gundy Securities, Inc., dated 8/29/97,
with a maturity value of $20,012,489
(Collateralized by $20,395,000 U.S. Government
Obligations, 6.50%, 2/25/02 -- 7/29/02, market
value -- $20,400,036)............................ 5.62% 09/02/97 20,000,000 20,000,000
First National Bank of Chicago, dated 8/29/97,
with a maturity value of $20,012,511
(Collateralized by $20,560,000 U.S. Government
Obligations, 5.50%-7.02%, 12/31/00 -- 7/15/07,
market value -- $20,404,519)..................... 5.63% 09/02/97 20,000,000 20,000,000
Fuji Securities, Inc., dated 8/29/97, with a
maturity value of $20,012,467 (Collateralized by
$20,581,000 various U.S. Government Obligations,
0.00%-9.70%, 9/22/97 -- 4/15/24, market
value -- $20,400,084)............................ 5.61% 09/02/97 20,000,000 20,000,000
HSBC Securities, Inc., dated 8/29/97, with a
maturity value of $20,012,489 (Collateralized by
$20,932,834 various U.S. Government Obligations,
0.00%-9.00%, 12/8/97 -- 9/1/26, market value --
$20,404,547)..................................... 5.62% 09/02/97 20,000,000 20,000,000
Merrill Lynch Securities, Inc., dated 8/29/97,
with a maturity value of $20,012,489
(Collateralized by $102,746,401 U.S. Government
Obligations, 6.00%-10.00%, 11/1/00 -- 3/1/18,
market value -- $20,400,843)..................... 5.62% 09/02/97 20,000,000 20,000,000
Nationsbanc, Inc., dated 8/29/97, with a maturity
value of $20,012,500 (Collateralized by
$20,909,000 U.S. Government Obligations, 0.00%,
1/7/98 -- 2/26/98, market
value -- $20,400,366)............................ 5.63% 09/02/97 20,000,000 20,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 55
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------------------- ---- -------- --------- ------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(B) -- (CONTINUED)
Prudential Securities, Inc., dated 8/29/97, with a
maturity value of $20,012,444 (Collateralized by
$20,025,000 U.S. Government Obligations, 0.00%-
6.25%, 2/26/98 -- 5/31/99, market value --
$20,400,600)..................................... 5.60% 09/02/97 $20,000,000 $ 20,000,000
Smith Barney, Inc., dated 8/29/97, with a maturity
value of $20,012,444 (Collateralized by
$27,934,185 Federal National Mortgage Association
Note, 6.50%, 4/1/09, market
value -- $20,400,000)............................ 5.60% 09/02/97 20,000,000 20,000,000
------------
TOTAL REPURCHASE AGREEMENT
(AMORTIZED COST $174,198,000).................... 174,198,000
------------
TOTAL INVESTMENTS -- 102.4%
(AMORTIZED COST 434,063,774)..................... 434,063,774
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.4%)... (10,103,268)
------------
NET ASSETS -- 100.0%.............................. $423,960,506
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $423,960,506.
(a) Cost for federal income tax and financial reporting purposes are
substantially the same.
(b) The range of coupon rates and maturity dates of collateral are shown.
* Variable rate security. Maturity date reflects the next interest rate
change date.
+ Rate represents effective yield at date of purchase.
See Notes to Financial Statements.
23
<PAGE> 56
PACIFIC HORIZON TREASURY ONLY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------------------- ---- -------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 94.1%
U.S. BILLS -- 19.3%
U.S. Treasury Bill............................... 5.45%+ 09/15/97 $30,000,000 $ 29,940,958
U.S. Treasury Bill............................... 5.37%+ 09/18/97 54,407,000 54,270,024
------------
TOTAL U.S. TREASURY BILLS
(AMORTIZED COST $84,210,982)..................... 84,210,982
------------
U.S. TREASURY NOTES -- 74.8%
U.S. Treasury Note............................... 5.75% 09/30/97 64,195,000 64,209,357
U.S. Treasury Note............................... 8.75% 10/15/97 58,275,000 58,500,508
U.S. Treasury Note............................... 5.63% 10/31/97 23,295,000 23,300,611
U.S. Treasury Note............................... 5.75% 10/31/97 30,000,000 30,014,476
U.S. Treasury Note............................... 7.38% 11/15/97 74,780,000 75,039,702
U.S. Treasury Note............................... 8.88% 11/15/97 40,525,000 40,785,843
U.S. Treasury Note............................... 5.25% 12/31/97 25,000,000 24,978,594
U.S. Treasury Note............................... 5.00% 01/31/98 9,780,000 9,754,356
------------
TOTAL U.S. TREASURY NOTES
(AMORTIZED COST $326,583,447).................... 326,583,447
------------
TOTAL INVESTMENTS -- 94.1%
(AMORTIZED COST $410,794,429)(A)................. 410,794,429
OTHER ASSETS IN EXCESS OF LIABILITIES -- 5.9%..... 25,695,573
------------
NET ASSETS -- 100.0%.............................. $436,490,002
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $436,490,002.
(a) Cost for federal income tax and financial reporting purposes are
substantially the same.
+ Rate represents effective yield at date of purchase.
See Notes to Financial Statements.
24
<PAGE> 57
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME TREASURY GOVERNMENT TREASURY
FUND FUND FUND ONLY FUND
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value (amortized cost
$6,135,705,637, $1,037,607,040, $259,865,774, and
$410,794,429, respectively)............................... $6,135,705,637 $1,037,607,040 $259,865,774 $410,794,429
Repurchase agreements (cost $1,881,809,000, $1,182,458,000,
$174,198,000, and $--, respectively)...................... 1,881,809,000 1,182,458,000 174,198,000 --
Cash....................................................... 26,337 10,149 2,485 1,413
Interest Receivable........................................ 41,624,568 31,501,744 1,896,922 9,942,189
Receivable for capital shares sold......................... 184,015,784 43,247,056 13,048,417 3,464,164
Receivable for investment securities sold.................. 2,083,305,000 1,557,423,000 182,641,000 82,715,968
Prepaid expenses........................................... 1,290,198 215,418 182,290 13,162
Deferred organizational costs.............................. -- -- 16,025 36,829
-------------- -------------- ------------ ------------
Total Assets............................................ 10,327,776,524 3,852,462,407 631,850,913 506,968,154
-------------- -------------- ------------ ------------
LIABILITIES:
Dividends payable.......................................... 35,043,189 11,144,019 1,896,329 1,786,440
Payable for investment securities purchased................ 1,981,823,530 1,182,458,000 184,190,800 60,045,255
Payable for capital shares redeemed........................ 335,925,601 118,404,646 21,519,702 7,689,009
Investment advisory fees payable........................... 602,283 218,793 18,727 37,049
Administration fees payable................................ 660,579 218,793 37,453 37,049
Special management fees payable (Pacific Horizon Shares)... 617,556 90,376 36,612 57,541
Shareholder service fees payable (Horizon Service
Shares)................................................... 661,706 330,512 55,036 42,552
Shareholder service fees payable (S Shares)................ 27,167 -- -- --
Shareholder service fees payable (X Shares)................ 98,980 5,557 -- --
Shareholder service fees payable (Y Shares)................ 3,830 1,399 -- --
12b-1 fees payable (X Shares).............................. 100,240 5,661 -- --
12b-1 fees payable (Y Shares).............................. 11,489 4,198 -- --
Custodian and fund accounting fees payable................. 146,903 76,330 33,925 29,426
Transfer agent fees payable................................ 27,764 17,859 23,904 13,810
Other accrued expenses..................................... 491,654 269,435 77,919 740,021
-------------- -------------- ------------ ------------
Total Liabilities....................................... 2,356,242,471 1,313,245,578 207,890,407 70,478,152
-------------- -------------- ------------ ------------
NET ASSETS................................................. $7,971,534,053 $2,539,216,829 $423,960,506 $436,490,002
============== ============== ============ ============
Net Assets:
Pacific Horizon Shares..................................... $2,257,973,852 $ 306,460,541 $131,977,630 $213,636,696
Horizon Shares............................................. 2,021,874,087 651,851,464 45,871,862 27,056,603
Horizon Service Shares..................................... 3,129,562,849 1,546,969,760 246,111,014 195,796,703
S Shares................................................... 118,539,347 -- -- --
Y Shares................................................... 36,737,587 8,575,078 -- --
X Shares................................................... 406,846,331 25,359,986 -- --
-------------- -------------- ------------ ------------
Total................................................... $7,971,534,053 $2,539,216,829 $423,960,506 $436,490,002
============== ============== ============ ============
Shares Outstanding ($0.001 par value, 120 billion, 60
billion, 30 billion, and 30 billion shares authorized,
respectively):
Pacific Horizon Shares................................... 2,258,185,450 306,616,098 132,172,504 213,660,132
Horizon Shares........................................... 2,022,168,081 651,970,162 45,913,190 27,056,497
Horizon Service Shares................................... 3,129,427,668 1,547,140,076 246,274,100 195,804,576
S Shares................................................. 118,538,233 -- -- --
Y Shares................................................. 36,737,583 8,575,078 -- --
X Shares................................................. 406,811,237 25,360,188 -- --
-------------- -------------- ------------ ------------
Total................................................... 7,971,868,252 2,539,661,602 424,359,794 436,521,205
============== ============== ============ ============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER
SHARE..................................................... $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................. $ 7,971,868 2,539,662 $ 424,360 $ 436,521
Additional paid-in capital................................. 7,963,495,319 2,536,146,254 423,935,434 436,084,685
Accumulated undistributed net investment income............ 3,514,158 667,877 517,569 --
Accumulated net realized losses on investment
transactions.............................................. (3,447,292) (136,964) (916,857) (31,204)
-------------- -------------- ------------ ------------
NET ASSETS, AUGUST 31, 1997................................ $7,971,534,053 $2,539,216,829 $423,960,506 $436,490,002
============== ============== ============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
25
<PAGE> 58
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT TREASURY ONLY
PRIME FUND TREASURY FUND FUND FUND
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest...................................... $209,184,808 $68,329,194 $12,870,176 $ 12,347,801
------------ ----------- ----------- -----------
EXPENSES:
Investment advisory fees...................... 3,360,652 1,243,655 232,092 231,331
Administration fees........................... 3,679,805 1,243,655 232,092 231,331
Special management fees (Pacific Horizon
Shares)..................................... 3,625,502 564,957 255,466 348,852
Shareholder service fees (Horizon Service
Shares)..................................... 3,857,672 1,863,062 317,180 273,696
Shareholder service fees (S Shares)........... 53,805 -- -- --
Shareholder service fees (X Shares)........... 375,826 15,855 -- --
Shareholder service fees (Y Shares)........... 3,907 1,414 -- --
12b-1 fees (S Shares)......................... 16,388 -- -- --
12b-1 fees (X Shares)......................... 450,991 18,832 -- --
12b-1 fees (Y Shares)......................... 11,722 4,243 -- --
Custodian and fund accounting fees............ 380,182 185,180 75,438 49,724
Transfer Agent fees........................... 162,342 70,985 33,596 48,944
Legal fees.................................... 295,692 112,670 21,970 19,470
Other expenses................................ 683,860 394,511 169,246 103,825
------------ ----------- ----------- -----------
Total Expenses.......................... 16,958,346 5,719,019 1,337,080 1,307,173
Less: Fee waivers............................. -- -- (116,046) --
Expenses paid by third parties................. -- -- (1,693) --
------------ ----------- ----------- -----------
Total Net Expenses............................. 16,958,346 5,719,019 1,219,341 1,307,173
------------ ----------- ----------- -----------
NET INVESTMENT INCOME.......................... 192,226,462 62,610,175 11,650,835 11,040,628
------------ ----------- ----------- -----------
NET REALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investment
transactions................................ 22,846 (78,987) 22,222 1,701
------------ ----------- ----------- -----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................... $192,249,308 $62,531,188 $11,673,057 $ 11,042,329
============ =========== =========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
26
<PAGE> 59
THIS PAGE INTENTIONALLY LEFT BLANK
27
<PAGE> 60
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME FUND
--------------------------------------
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
---------------- ----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................................. $ 192,226,462 $ 313,627,480
Net realized gains (losses) on investment transactions................ 22,846 172,885
---------------- ----------------
Change in net assets resulting from operations........................ 192,249,308 313,800,365
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Pacific Horizon Shares................................................ (57,653,267) (110,595,534)
Horizon Shares........................................................ (46,310,824) (79,709,197)
Horizon Service Shares................................................ (79,626,947) (119,808,778)
S Shares.............................................................. (629,524)(b) --
Y Shares.............................................................. (70,391)(c) --
X Shares.............................................................. (7,329,789) (2,322,836)(a)
---------------- ----------------
Change in net assets from shareholder distributions.................... (191,620,742) (312,436,345)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares Issued........................................... 24,957,660,701 42,442,585,809
Dividends reinvested.................................................. 89,864,407 177,262,119
Cost of shares redeemed............................................... (24,227,328,843) (40,881,572,699)
---------------- ----------------
Change in net assets from capital share transactions................... 820,196,265 1,738,275,229
---------------- ----------------
Change in net assets................................................... 820,824,831 1,739,639,249
NET ASSETS
Beginning of Period................................................... 7,150,709,222 5,411,069,973
---------------- ----------------
End of Period......................................................... $ 7,971,534,053 $ 7,150,709,222
================ ================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
See Notes to Financial Statements.
28
<PAGE> 61
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY FUND GOVERNMENT FUND TREASURY ONLY FUND
------------------------------------- ------------------------------------ ----------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED
1997 FEBRUARY 28, 1997 FEBRUARY 28, 1997 FEBRUARY 28,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
--------------- ---------------- --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 62,610,175 $ 139,590,623 $ 11,650,835 $ 26,370,373 $ 11,040,628 $ 22,616,016
(78,987) 86,112 22,222 12,552 1,701 31,462
--------------- ---------------- --------------- --------------- ------------- ---------------
62,531,188 139,676,735 11,673,057 26,382,925 11,042,329 22,647,478
--------------- ---------------- --------------- --------------- ------------- ---------------
(8,670,483) (38,697,555) (3,947,580) (10,822,314) (5,149,224) (12,248,712)
(16,481,973) (34,033,530) (1,336,707) (3,358,368) (647,928) (2,009,735)
(37,137,003) (66,796,890) (6,366,548) (12,135,558) (5,243,476) (8,357,569)
-- -- -- -- -- --
(296,397) (c) -- -- -- -- --
(24,319) (62,648)(a) -- -- -- --
--------------- ---------------- --------------- --------------- ------------- ---------------
(62,610,175) (139,590,623) (11,650,835) (26,316,240) (11,040,628) (22,616,016)
--------------- ---------------- --------------- --------------- ------------- ---------------
7,795,152,294 17,362,879,524 1,537,381,377 3,514,048,456 836,062,876 2,581,288,044
18,939,282 46,043,231 7,720,518 20,515,585 6,761,008 17,977,687
(7,866,290,247) (17,661,736,799) (1,637,750,888) (3,547,375,120) (921,538,489) (2,551,597,500)
--------------- ---------------- --------------- --------------- ------------- ---------------
(52,198,671) (252,814,044) (92,648,993) (12,811,079) (78,714,605) 47,668,231
--------------- ---------------- --------------- --------------- ------------- ---------------
(52,277,658) (252,727,932) (92,626,771) (12,744,394) (78,712,904) 47,699,693
2,591,494,487 2,844,222,419 516,587,277 529,331,671 515,202,906 467,503,213
--------------- ---------------- --------------- --------------- ------------- ---------------
$ 2,539,216,829 $ 2,591,494,487 $ 423,960,506 $ 516,587,277 $ 436,490,002 $ 515,202,906
=============== ================ =============== =============== ============= ===============
</TABLE>
29
<PAGE> 62
PACIF IC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. On August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Prime Fund (the
"Prime Fund"), Pacific Horizon Treasury Fund (the "Treasury Fund"), Pacific
Horizon Government Fund (the "Government Fund") and Pacific Horizon Treasury
Only Fund (the "Treasury Only Fund"), collectively the "Funds".
The Funds each issue three classes of shares (Pacific Horizon Shares,
Horizon Shares and Horizon Services Shares). Effective July 22, 1996, the Prime
Fund and the Treasury Fund began offering X Shares. The Prime Fund began
offering S Shares effective April 7, 1997 and effective July 10, 1997 the Prime
Fund and the Treasury Fund each began offering Y Shares. The Treasury Fund is
also authorized to issue S shares for purchase as of the date of this report.
Pacific Horizon Shares have a Special Management Services Agreement/Plan while
the Horizon Service Shares have a Shareholder Services Plan. X, S and Y Shares
each have a Distribution and Services Plan.
The investment objectives of the Funds are as follows:
Prime Fund -- Seek high current income and stability of principal by
investing in a broad range of government, bank and commercial obligations
available in the money markets as well as repurchase agreements relating to such
obligations.
Treasury Fund -- Seek high current income and stability of principal by
investing in direct obligations of the U.S. Treasury and repurchase agreements
relating to Treasury obligations.
Government Fund -- Provide liquidity and as high a level of current income
as is consistent with the preservation of capital by investing in short-term
debt obligations issued or guaranteed as to interest and principal by the U.S.
Government, its agencies, authorities or instrumentalities and in repurchase
agreements with respect to such obligations.
Treasury Only Fund -- Provide liquidity and as high a level of current
income as is consistent with the preservation of capital by investing in direct
obligations of the U.S. Treasury, such as Treasury bills, notes and bonds.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Con-
30
<PAGE> 63
cord Financial Group, Inc. (the "Distributor"), an indirect, wholly-owned
subsidiary of BISYS, served as the distributor of the Fund's shares through
September 15, 1997. BISYS Fund Services, Inc. ("BISYS Ohio"), also a
wholly-owned subsidiary of BISYS, served as transfer agent and dividend
disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The securities of the Funds 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 Funds may not (a) purchase any instrument with a
31
<PAGE> 64
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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses from security transactions are recorded on an
identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
REPURCHASE AGREEMENTS (PRIME FUND, TREASURY FUND, AND GOVERNMENT FUND):
The Funds' 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, exceeds the repurchase price. In the
event of the seller's default of the obligation to repurchase, the Funds have
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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income is declared as a dividend daily, and paid
monthly, to shareholders of record at the close of business on record date. Net
realized gains on portfolio securities, if
any, are distributed at least annually. However, to the extent that net realized
gains of the Funds can be offset by capital loss carryovers of the Funds, such
gains will not be distributed. Dividends and distributions are recorded by the
Funds on the ex-dividend date.
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.
Dividends and distribu-
32
<PAGE> 65
tions to shareholders which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized gains. To the extent they exceed net investment income
and net realized gains for tax purposes, they are reported as distributions of
capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
------------- --------------
<S> <C> <C>
Prime Fund $ 2,742 $182,342
Government
Fund 413 (413)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the Prime Fund, Treasury Fund, Government Fund, and
Treasury Only Fund had the following capital loss carryovers:
<TABLE>
<CAPTION>
CAPITAL
LOSS EXPIRATION
FUND CARRYOVER DATE
- ---------------------- ---------- ----------
<S> <C> <C>
Prime Fund $ 744,962 2002
2,725,176 2003
-----------
$ 3,470,138
===========
Treasury Fund $ 47,456 2002
===========
Government Fund $ 939,079 2003
===========
Treasury Only Fund $ 23,969 2003
===========
</TABLE>
To the extent that these carryovers are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders.
Capital losses incurred after October 31 for the Funds are deemed to arise
on the first business day of the following fiscal year for tax purposes. The
Treasury Only Fund has incurred and elected to defer such capital losses of
$8,458 after October 31, 1996. During the year, the Prime Fund, Treasury Fund,
Government Fund, and Treasury Only Fund utilized $172,885, $10,901, $12,552, and
$40,236, respectively, of its available capital loss carryover to offset
realized capital gains for Federal income tax purposes.
OTHER:
The Funds maintain a cash balance with their 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, 1997, custodian fees and expenses paid by third parties
were increased by $1,693 for the Government Fund. There was no effect on net
investment income. The Funds could have
33
<PAGE> 66
invested such cash balances in income producing assets if they had not agreed to
a reduction of fees or expenses under the expense offset arrangement with their
custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America. For
the six months ended August 31, 1997, the Funds had an Administration Agreement
with BISYS. Bank of America is entitled to a fee from each Fund, which is
accrued daily and payable monthly, at an annual rate of 0.10% of each Fund's
first $3 billion of net assets, plus 0.09% of each Fund's next $2 billion of net
assets, plus 0.08% of each Fund's net assets in excess of $5 billion. BISYS was
entitled to a fee for each fund which is accrued daily and payable monthly, at
an annual rate of 0.10% of each Fund's first $7 billion of net assets, plus
0.09% of each Fund's next $3 billion of net assets, plus 0.08% of each Fund's
net assets in excess of $10 billion. For the six months ended August 31, 1997,
Bank of America voluntarily waived fees from the Government Fund in the amount
of $116,046.
The Funds have entered into a Special Management Services Agreement (the
"Services Agreement") pursuant to which they agree to pay Bank of America and
BISYS 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 assets of the outstanding Pacific Horizon Shares of each Fund.
Fees under the Services Agreement are borne solely by the Pacific Horizon
Shares.
Effective January 1997, the Services Agreement was terminated. The Funds
have adopted a Special Management Services Plan (the "Services Plan") pursuant
to which Service Organizations agree to provide certain services to their
clients who are beneficial owners of Pacific Horizon Shares in return for a
payment by the Funds of a fee at an annual rate 0.32% of the average daily net
assets of the outstanding Pacific Horizon Shares of each Fund. Fees under the
Services Plan are borne solely by the Pacific Horizon Shares. Service
organizations include BISYS, Bank of America and its affiliates. For the six
months ended August 31, 1997, the Funds were advised that BISYS, Bank of America
and their affiliates earned the following amounts pursuant to the Services
Agreement and Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES BISYS
- --------------------------- ---------- -------
<S> <C> <C>
Prime Fund $3,346,248 $22,110
Treasury Fund 416,132 5,446
Government Fund 240,521 159
Treasury Only Fund 317,930 25
</TABLE>
The Funds have also adopted a Shareholder Services Plan (the "Horizon
Services 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 Funds of a fee at an annual rate of 0.25% of the
average daily net assets of the Horizon Service Shares, which are borne solely
by the Horizon Service Shares. Service Organizations may include the
Distributor, Bank of
34
<PAGE> 67
America and their affiliates. For the six months ended August 31, 1997, the
Funds were advised that BISYS, Bank of America and its affiliates earned the
following amounts pursuant to the Horizon Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
- ----------------------------------- ----------
<S> <C>
Prime Fund $3,166,103
Treasury Fund 1,529,124
Government Fund 260,334
Treasury Only Fund 224,526
</TABLE>
The Prime Fund and Treasury Fund have adopted the Distribution and Services
Plan under which the Funds pay 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 each Fund's X Shares. For the six months ended August 31, 1997 the
Funds were advised that Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
- ----------------------------------- ----------
<S> <C>
Prime Fund $374,472
Treasury Fund 15,796
</TABLE>
The Prime Fund and Treasury Fund have adopted the Distribution and Services
Plan under which the Funds pay the Distributor and Service Organization for the
provision of support service with respect to the beneficial owners of Y shares.
Payments for distribution expenses and shareholder servicing expenses may not
exceed the annual rate of 0.75% and 0.25%; respectively, of the average daily
net assets of each Funds' Y shares. For the period from July 10, 1997(date of
inception) to August 31, 1997, the Funds were advised that Bank of America and
its affiliates earned the following amounts pursuant to the Distribution and
Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
- ----------------------------------- ----------
<S> <C>
Prime Fund $3,907
Treasury Fund 1,414
</TABLE>
The Prime Fund has adopted the Distribution and Services Plan under which
the Fund pays the Distributor and Service Organization for the provision of
support services with respect to the beneficial owners of S shares. Payments for
the distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%, respectively, of the average daily net assets of
the Fund's S shares. For the period from April 7, 1997(date of inception) to
August 31, 1997 the Fund was advised that Bank of America and its affiliates
earned $31,874 pursuant to the Distribution and Services Plan.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $162,342, $70,985, $33,596 and $48,944
from the Prime Fund, Treasury Fund, Government Fund and Treasury Only Fund,
respectively, for the six months ended August 31, 1997.
For the six months ended August 31, 1997, the Prime Fund, Treasury Fund,
35
<PAGE> 68
Government Fund and Treasury Only Fund incurred legal charges totaling $295,692,
$112,670, $21,970, and $19,470, respectively, which were earned by a law firm, a
partner of which serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the Director participates in all or part of a Board or
Committee meeting and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a Director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. A Director who dies or
resigns after nine years of service as a Director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. In addition, the amount
payable each year to a Director who dies or resigns shall be increased by $1,000
for each year of service that the Director served as Chairman of the Board. Each
Director may receive any benefits payable under the Retirement Plan, at his or
her election, either in one lump sum payment or ten annual installments. A
Director's years of service for the purpose of calculating the payments
described above shall be based upon service as a Director or Chairman after
February 28, 1994. Aggregate costs pursuant to the Retirement Plan amounted to
$15,064, $11,030, $4,600, and $1,819, for the Prime Fund, Treasury Fund,
Government Fund and Treasury Only Fund, respectively, for the six months ended
August 31, 1997.
36
<PAGE> 69
NOTE 5 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of each Fund (at $1.00 per share) for the periods
indicated are summarized below:
<TABLE>
<CAPTION>
PRIME FUND TREASURY FUND
----------------------------------- -----------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997 AUGUST 31, 1997 FEBRUARY 28, 1997
--------------- ----------------- --------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Pacific Horizon
Shares
Issued.......... 1,421,450,092 4,320,031,345 580,948,866 2,180,160,265
Reinvest........ 44,139,878 99,202,915 5,469,113 13,626,783
Redeemed........ (1,500,161,348) (4,326,928,364) (690,637,528) (2,875,003,912)
-------------- -------------- -------------- --------------
Net increase/
(decrease)...... (34,571,378) 92,305,896 (104,219,549) (681,216,864)
============== ============== ============== ==============
Horizon Shares
Issued.......... 9,219,317,384 15,114,015,999 2,396,397,412 6,363,082,166
Reinvest........ 13,412,109 25,723,399 4,036,829 11,616,438
Redeemed........ (8,920,510,978) (15,081,065,299) (2,366,293,414) (6,478,650,334)
-------------- --------------- -------------- --------------
Net increase/
(decrease)...... 312,218,515 58,674,099 34,140,827 (103,951,730)
============== =============== ============== ==============
Horizon Service
Shares
Issued.......... 13,634,158,320 22,771,276,975 4,767,137,830 8,799,447,002
Reinvest...... 26,468,915 50,011,411 9,248,752 20,737,353
Redeemed...... (13,476,384,289) (21,437,775,542) (4,786,570,782) (8,293,700,822)
-------------- --------------- -------------- --------------
Net increase/
(decrease)...... 184,242,946 1,383,512,844 (10,184,200) 526,483,533
============== =============== ============== ==============
X Shares
Issued.......... 518,517,302 237,259,971 40,077,584 20,188,155
Reinvest........ 5,573,041 2,324,394 184,588 62,656
Redeemed........ (321,059,977) (35,803,494) (20,772,999) (14,379,796)
-------------- --------------- -------------- --------------
Net increase..... 203,030,366 203,780,871(a) 19,489,173 5,871,015(a)
============== =============== ============== ==============
S Shares
Issued.......... 122,180,115 -- -- --
Reinvest........ 270,464 -- -- --
Redeemed........ (3,912,346) -- -- --
-------------- --------------- -------------- --------------
Net increase..... 118,538,233 (b) -- -- --
============== =============== ============== ==============
Y Shares
Issued.......... 42,037,008 -- 10,590,602 --
Reinvest........ -- -- -- --
Redeemed........ (5,299,425) -- (2,015,524) --
-------------- --------------- -------------- --------------
Net increase..... 36,737,583 (c) -- 8,575,078(c) --
============== =============== ============== ==============
</TABLE>
37
<PAGE> 70
<TABLE>
<CAPTION>
GOVERNMENT FUND TREASURY ONLY FUND
----------------------------------- -----------------------------------
SIX MONTH ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997 AUGUST 31, 1997 FEBRUARY 28, 1997
--------------- ----------------- --------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Pacific Horizon
Shares
Issued.......... 257,713,167 817,557,991 226,866,017 1,028,727,745
Reinvest........ 3,157,080 8,010,482 3,890,458 10,180,140
Redeemed........ (321,130,038) (894,476,160) (242,297,570) (1,088,026,565)
-------------- -------------- ------------ --------------
Net decrease..... (60,259,791) (68,907,687) (11,541,095) (49,118,680)
============== ============== ============ ==============
Horizon Shares
Issued.......... 79,305,963 205,437,403 22,424,393 195,585,962
Reinvest........ 829,562 2,653,506 176,047 1,168,058
Redeemed........ (95,392,117) (201,774,473) (26,002,534) (173,560,437)
-------------- -------------- ------------ --------------
Net increase/
(decrease)...... (15,256,592) 6,316,436 (3,402,094) 23,193,583
============== ============== ============ ==============
Horizon Service
Shares
Issued.......... 1,200,362,247 2,491,053,062 586,772,466 1,356,974,337
Reinvest........ 3,733,876 9,851,597 2,694,503 6,629,489
Redeemed........ (1,221,228,733) (2,451,124,487) (653,238,385) (1,290,010,498)
-------------- -------------- ------------ --------------
Net increase/
(decrease)...... (17,132,610) 49,780,172 (63,771,416) 73,593,328
============== ============== ============ ==============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
38
<PAGE> 71
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income............. 0.0258 0.0492 0.0539 0.0424 0.0287 0.0340
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------ ------ ------ ------ ------ ------
Total income from investment
operations........................ 0.0258 0.0492 0.0543 0.0197 0.0271 0.0340
Less dividends to shareholders from
net investment income............. (0.0257) (0.0490) (0.0539) (0.0422) (0.0287) (0.0341)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------ ------ ------ ------ ------ ------
Net change in net asset value per
share............................. 0.0001 0.0002 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 $ 1.00
====== ====== ====== ====== ====== ======
Total return....................... 2.59%(d) 5.01% 5.53% 4.30%+ 2.91% 3.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)........................ $ 2,258 $ 2,292 $ 2,200 $ 1,129 $ 1,216 $ 992
Ratio of expenses to average net
assets............................ 0.55%(c) 0.55% 0.55% 0.51% 0.52% 0.55%
Ratio of net investment income to
average net assets................ 5.11%(c) 4.92% 5.37% 4.19% 2.86% 3.42%
Ratio of expenses to average net
assets*........................... (b) (b) 0.56% 0.56% 0.53% (a)
Ratio of net investment income to
average net assets*............... (b) (b) 5.36% 4.14% 2.85% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
39
<PAGE> 72
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0273 0.0524 0.0571 0.0461 0.0319 0.0372
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0232) (0.0016) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0273 0.0524 0.0575 0.0229 0.0303 0.0372
Less dividends to shareholders from
net investment income............. (0.0273) (0.0522) (0.0571) (0.0454) (0.0319) (0.0372)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- 0.0002 0.0004 0.0008 (0.0016) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.76%(d) 5.34% 5.86% 4.63%+ 3.24% 3.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 2,022 $ 1,710 $ 1,651 $ 662 $ 3,840 $ 10,301
Ratio of expenses to average net
assets.......................... 0.23%(c) 0.23% 0.23% 0.16% 0.20% 0.23%
Ratio of net investment income to
average net assets.............. 5.43%(c) 5.24% 5.69% 4.11% 3.19% 3.59%
Ratio of expenses to average net
assets*......................... (b) (b) 0.24% 0.23% 0.21% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.68% 4.04% 3.18% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
40
<PAGE> 73
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0261 0.0499 0.0546 0.0431 0.0294 0.0345
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0261 0.0499 0.0550 0.0204 0.0278 0.0345
Less dividends to shareholders from
net investment income............. (0.0260) (0.0497) (0.0546) (0.0429) (0.0294) (0.0347)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. 0.0001 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 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.63%(d) 5.08% 5.60% 4.37%+ 2.98% 3.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 3,130 $ 2,945 $ 1,561 $ 864 $ 839 $ 793
Ratio of expenses to average net
assets.......................... 0.48%(c) 0.48% 0.48% 0.44% 0.45% 0.48%
Ratio of net investment income to
average net assets.............. 5.18%(c) 5.00% 5.44% 4.31% 2.94% 3.49%
Ratio of expenses to average net
assets*......................... (b) (b) 0.49% 0.48% 0.46% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.43% 4.27% 2.93% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
41
<PAGE> 74
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income.............................. 0.0245 0.0282
Net realized gains/(losses) on investment
transactions..................................... -- --
-------- --------
Total income from investment operations.............. 0.0245 0.0282
Less dividends to shareholders from net investment
income............................................. (0.0245) (0.0281)
-------- --------
Net change in net asset value per share.............. -- 0.0001
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 1.00 $ 1.00
======== ========
Total return......................................... 2.48%(d) 2.84%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............. $ 407 $ 204
Ratio of expenses to average net assets............ 0.78%(c) 0.78%(c)
Ratio of net investment income to average net
assets........................................... 4.90%(c) 4.73%(c)
Ratio of expenses to average net assets*........... (b) (b)
Ratio of net investment income to average net
assets*.......................................... (b) (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
42
<PAGE> 75
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0197
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0197
Less dividends to shareholders from net investment
income................................................. (0.0197)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 119
Ratio of expenses to average net assets................ 0.78%(c)
Ratio of net investment income to average net assets... 4.94%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from April 7, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
43
<PAGE> 76
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
Y SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0065
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0065
Less dividends to shareholders from net investment
income................................................. (0.0065)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 37
Ratio of expenses to average net assets................ 1.23%(c)
Ratio of net investment income to average net assets... 4.50%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 10, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
44
<PAGE> 77
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0249 0.0477 0.0527 0.0405 0.0262 0.0309
Net realized gains/(losses) on
investment transactions......... -- -- 0.0011 0.0001 (0.0002) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0249 0.0477 0.0538 0.0406 0.0260 0.0309
Less dividends to shareholders from
net investment income............. (0.0247) (0.0477) (0.0527) (0.0405) (0.0262) (0.0311)
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. 0.0002 -- 0.0011 0.0001 (0.0002) (0.0002)
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.50%(d) 4.87% 5.40% 4.13% 2.65% 3.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 306 $ 411 $ 1,091 $ 1,132 $ 1,577 $ 1,746
Ratio of expenses to average net
assets.......................... 0.58%(c) 0.57% 0.57% 0.55% 0.55% 0.56%
Ratio of net investment income to
average net assets.............. 4.91%(c) 4.76% 5.24% 3.99% 2.62% 3.11%
Ratio of expenses to average net
assets*......................... (b) (b) 0.58% (a) (a) (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.23% (a) (a) (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
45
<PAGE> 78
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0264 0.0509 0.0559 0.0437 0.0294 0.0341
Net realized gains/(losses) on
investment transactions......... -- -- 0.0011 0.0001 (0.0002) 0.0002
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0264 0.0509 0.0570 0.0438 0.0292 0.0343
Less dividends to shareholders from
net investment income............. (0.0264) (0.0509) (0.0559) (0.0437) (0.0294) (0.0343)
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- -- 0.0011 0.0001 (0.0002) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.66%(d) 5.21% 5.73% 4.46% 2.98% 3.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 652 $ 618 $ 722 $ 469 $ 487 $ 598
Ratio of expenses to average net
assets.......................... 0.26%(c) 0.25% 0.25% 0.23% 0.23% 0.24%
Ratio of net investment income to
average net assets.............. 5.23%(c) 5.09% 5.56% 4.36% 2.94% 3.38%
Ratio of expenses to average net
assets*......................... (b) (b) 0.26% (a) (a) (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.55% (a) (a) (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
46
<PAGE> 79
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0251 0.0484 0.0534 0.0412 0.0269 0.0316
Net realized gains/(losses) on
investment transactions......... -- -- 0.0011 0.0001 (0.0002) 0.0002
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0251 0.0484 0.0545 0.0413 0.0267 0.0318
Less dividends to shareholders from
net investment income............. (0.0251) (0.0484) (0.0534) (0.0412) (0.0269) (0.0318)
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- -- 0.0011 0.0001 (0.0002) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.54%(d) 4.97% 5.47% 4.20% 2.72% 3.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 1,547 $ 1,557 $ 1,031 $ 364 $ 541 $ 369
Ratio of expenses to average net
assets.......................... 0.51%(c) 0.50% 0.50% 0.48% 0.48% 0.49%
Ratio of net investment income to
average net assets.............. 4.98%(c) 4.84% 5.31% 4.01% 2.69% 3.28%
Ratio of expenses to average net
assets*......................... (b) (b) 0.51% (a) (a) (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.30% (a) (a) (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
47
<PAGE> 80
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 1.00 $ 1.00
-------- --------
Income from Investment Operations:
Net investment income.............................. 0.0236 0.0271
-------- --------
Total income from investment operations.............. 0.0236 0.0271
Less dividends to shareholders from net investment
income............................................. (0.0236) (0.0271)
-------- --------
Net change in net asset value per share.............. -- --
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 1.00 $ 1.00
======== ========
Total return......................................... 2.38%(d) 2.74%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............. $ 25 $ 6
Ratio of expenses to average net assets............ 0.81%(c) 0.81%(c)
Ratio of net investment income to average net
assets........................................... 4.72%(c) 4.58%(c)
Ratio of expenses to average net assets*........... (b) (b)
Ratio of net investment income to average net
assets*.......................................... (b) (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
48
<PAGE> 81
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
Y SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD............ $ 1.00
--------
Income from Investment Operations:
Net investment income................................... 0.0173
--------
Total income from investment operations................... 0.0173
Less dividends to shareholders from net investment
income.................................................. (0.0173)
--------
Net change in net asset value per share................... --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD.................. $ 1.00
========
Total return.............................................. 2.32%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions).................. $ 9
Ratio of expenses to average net assets................. 1.27%(c)
Ratio of net investment income to average net assets.... 4.30%(c)
Ratio of expenses to average net assets*................ (b)
Ratio of net investment income to average net assets*... (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 10, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
49
<PAGE> 82
PACIFIC HORIZON GOVERNMENT FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ---------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income........ 0.0255 0.0481 0.0530 0.0421 0.0288
Net realized gains/(losses)
on investment
transactions............... -- -- (0.0004)** (0.0091) (0.0006)
-------- -------- -------- -------- --------
Total income from investment
operations..................... 0.0255 0.0481 0.0526 0.0330 0.0282
Less dividends to shareholders
from net investment income..... (0.0249) (0.0480) (0.0524) (0.0420) (0.0288)
Increase due to voluntary
capital contribution from
Investment Advisor............. -- -- -- 0.0085 --
-------- -------- -------- -------- --------
Net change in net asset value
per share...................... 0.0006 0.0001 0.0002 (0.0005) (0.0006)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END
OF PERIOD...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return.................... 2.52%(c) 4.91% 5.37% 4.28%+ 2.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................... $ 132 $ 192 $ 261 $ 355 $ 154
Ratio of expenses to average
net assets................... 0.60%(b) 0.55% 0.56% 0.50% 0.60%
Ratio of net investment income
to average net assets........ 4.94%(b) 4.82% 5.34% 4.27% 2.88%
Ratio of expenses to average
net assets*.................. 0.65%(b) 0.61%(a) 0.63% 0.58% 0.60%
Ratio of net investment income
to average net assets*....... 4.89%(b) 4.76%(a) 5.27% 4.19% 2.88%
</TABLE>
- ---------------
* 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.
** Net realized loss for the period is a direct result of a decrease in
outstanding shares between February 28, 1995 and the date of the gain
realization.
(a) Fees paid by third parties had no effect on the ratios.
(b) Annualized.
(c) Not annualized.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Advisor. Without this capital contribution, the total return
would have been lower.
See Notes to Financial Statements.
50
<PAGE> 83
PACIFIC HORIZON GOVERNMENT FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ---------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994(b)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income..... 0.0268 0.0513 0.0600 0.0454 0.0227
Net realized
gains/(losses) on
investment
transactions............ -- -- (0.0042)** (0.0092) (0.0006)
-------- -------- -------- -------- --------
Total income from investment
operations.................. 0.0268 0.0513 0.0558 0.0362 0.0221
Less dividends to
shareholders from net
investment income........... (0.0265) (0.0512) (0.0556) (0.0452) (0.0227)
Increase due to voluntary
capital contribution from
Investment Advisor.......... -- -- -- 0.0085 --
-------- -------- -------- -------- --------
Net change in net asset value
per share................... 0.0003 0.0001 0.0002 (0.0005) (0.0006)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return................. 2.68%(d) 5.25% 5.71% 4.61%+ 2.29%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................ $ 46 $ 61 $ 55 $ 235 $ 370
Ratio of expenses to average
net assets................ 0.28%(c) 0.22% 0.24% 0.17% 0.28%(c)
Ratio of net investment
income to average net
assets.................... 5.27%(c) 5.15% 5.66% 4.67% 3.17%(c)
Ratio of expenses to average
net assets*............... 0.33%(c) 0.29%(a) 0.30% 0.25% 0.28%(c)
Ratio of net investment
income to average net
assets*................... 5.22%(c) 5.08%(a) 5.60% 4.59% 3.17%(c)
</TABLE>
- ---------------
* 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.
** Net realized loss for the period is a direct result of a decrease in
outstanding shares between February 28, 1995 and the date of the gain
realization.
(a) Fees paid by third parties had no effect on the ratios.
(b) Period from June 14, 1993 (inception date) to February 28, 1994.
(c) Annualized.
(d) Not annualized.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Advisor. Without this capital contribution, the total return
would have been lower.
See Notes to Financial Statements.
51
<PAGE> 84
PACIFIC HORIZON GOVERNMENT FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income........................ 0.0254 0.0488 0.0537 0.0429 0.0300
Net realized gains/(losses) on investment
transactions............................... -- -- (0.0004)** (0.0092) (0.0006)
------- ------- ------- ------- -------
Total income from investment operations....... 0.0254 0.0488 0.0533 0.0337 0.0294
Less dividends to shareholders from net
investment income............................ (0.0253) (0.0487) (0.0531) (0.0427) (0.0300)
Increase due to voluntary capital contribution
from Investment Advisor...................... -- -- -- 0.0085 --
------- ------- ------- ------- -------
Net change in net asset value per share....... 0.0001 0.0001 0.0002 (0.0005) (0.0006)
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return.................................. 2.56%(c) 4.98% 5.44% 4.35%+ 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)....... $ 246 $ 263 $ 213 $ 289 $ 326
Ratio of expenses to average net assets...... 0.53%(b) 0.48% 0.49% 0.43% 0.48%
Ratio of net investment income to average net
assets..................................... 5.02%(b) 4.89% 5.41% 4.32% 2.99%
Ratio of expenses to average net assets*..... 0.58%(b) 0.54%(a) 0.56% 0.51% 0.53%
Ratio of net investment income to average net
assets*.................................... 4.97%(b) 4.83%(a) 5.34% 4.24% 2.94%
</TABLE>
- ---------------
* 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.
** Net realized loss for the period is a direct result of a decrease in
outstanding shares between February 28, 1995 and the date of the gain
realization.
(a) Fees paid by third parties had no effect on the ratios.
(b) Annualized.
(c) Not annualized.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Advisor. Without this capital contribution, the total return
would have been lower.
See Notes to Financial Statements.
52
<PAGE> 85
PACIFIC HORIZON TREASURY ONLY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income........................ 0.0238 0.0458 0.0495 0.0384 0.0254
Net realized gains/(losses) on investment
transactions............................... -- 0.0001 0.0003 (0.0002) (0.0002)
------- ------- ------- ------- -------
Total income from investment operations....... 0.0238 0.0459 0.0498 0.0382 0.0252
Less dividends to shareholders from net
investment income............................ (0.0238) (0.0458) (0.0495) (0.0384) (0.0254)
------- ------- ------- ------- -------
Net change in net asset value per share....... -- 0.0001 0.0003 (0.0002) (0.0002)
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return.................................. 2.41%(d) 4.68% 5.06% 3.90% 2.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)....... $ 214 $ 225 $ 274 $ 90 $ 72
Ratio of expenses to average net assets...... 0.62%(c) 0.60% 0.63% 0.62% 0.56%
Ratio of net investment income to average net
assets..................................... 4.72%(c) 4.59% 4.94% 3.90% 2.54%
Ratio of expenses to average net assets*..... (b) (b) (a) 0.63% 0.72%
Ratio of net investment income to average net
assets*.................................... (b) (b) (a) 3.89% 2.38%
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
53
<PAGE> 86
PACIFIC HORIZON TREASURY ONLY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED PERIOD ENDED
1997 FEBRUARY 28, FEBRUARY 29,
(UNAUDITED) 1997 1996 (a)
----------- ------------ ------------
<S> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Income from Investment Operations:
Net investment income........................... 0.0254 0.0490 0.0227
Net realized gains/(losses) on investment
transactions.................................. -- 0.0001 (0.0001)
------- ------- -------
Total income from investment operations........... 0.0254 0.0491 0.0226
Less dividends to shareholders from net investment
income.......................................... (0.0254) (0.0490) (0.0227)
------- ------- -------
Net change in net asset value per share........... -- 0.0001 (0.0001)
------- ------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD.......... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total return...................................... 2.57%(e) 5.02% 2.30%(e)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions).......... $ 27 $ 30 $ 7
Ratio of expenses to average net assets......... 0.30%(d) 0.27% 0.70%(d)
Ratio of net investment income to average net
assets........................................ 5.05%(d) 4.94% 11.88%(d)
Ratio of expenses to average net assets*........ (c) (c) (b)
Ratio of net investment income to average net
assets*....................................... (c) (c) (b)
</TABLE>
- ---------------
* 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.
(a) Period from September 20, 1995 (inception date) to February 29, 1996.
(b) There were no fee waivers or expense reimbursements during the period.
(c) Fees paid by third parties had no effect on the ratios.
(d) Annualized.
(e) Not annualized.
See Notes to Financial Statements.
54
<PAGE> 87
PACIFIC HORIZON TREASURY ONLY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income........................ 0.0242 0.0465 0.0502 0.0391 0.0273
Net realized gains/(losses) on investment
transactions............................... -- 0.0001 0.0003 (0.0002) (0.0002)
------- ------- ------- ------- -------
Total income from investment operations....... 0.0242 0.0466 0.0505 0.0389 0.0271
Less dividends to shareholders from net
investment income............................ (0.0242) (0.0465) (0.0502) (0.0391) (0.0273)
------- ------- ------- ------- -------
Net change in net asset value per share....... -- 0.0001 0.0003 (0.0002) (0.0002)
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return.................................. 2.44%(d) 4.75% 5.14% 3.98% 2.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)....... $ 196 $ 260 $ 186 $ 194 $ 272
Ratio of expenses to average net assets...... 0.55%(c) 0.53% 0.56% 0.55% 0.39%
Ratio of net investment income to average net
assets..................................... 4.79%(c) 4.66% 5.01% 3.86% 2.73%
Ratio of expenses to average net assets*..... (b) (b) (a) 0.56% 0.64%
Ratio of net investment income to average net
assets*.................................... (b) (b) (a) 3.85% 2.48%
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
55
<PAGE> 88
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 89
---------------
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
---------------
[PACIFIC HORIZON FUNDS LOGO]
Provident Distributor, Inc., Distributor
PRM-0029 10/97
<PAGE> 90
PACIFIC HORIZON TAX-EXEMPT INCOME FUNDS
SEMI-ANNUAL REPORT
August 31, 1997
National Municipal Bond Fund
California Tax-Exempt Bond Fund
Investing For All
The Times Of Your Life
NOT FDIC INSURED
PACIFIC HORIZON TAX-EXEMPT INCOME FUNDS
<PAGE> 91
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 92
CONTENTS
<TABLE>
<S> <C>
.
.
. FUND FACTS 2-3
.
. UNDERSTANDING YOUR SHAREHOLDER REPORT 4-6
.
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
.
. PORTFOLIO OF INVESTMENTS
.
. National Municipal Bond Fund 10-14
.
. California Tax-Exempt Bond Fund 15-21
.
. STATEMENTS OF ASSETS AND LIABILITIES
.
. National Municipal Bond Fund 22
.
. California Tax-Exempt
. Bond Fund 23
.
. STATEMENTS OF OPERATIONS
.
. National Municipal Bond Fund 24
.
. California Tax-Exempt Bond Fund 25
.
. STATEMENTS OF CHANGES IN NET ASSETS
.
. National Municipal Bond Fund 26
.
. California Tax-Exempt Bond Fund 27
.
. NOTES TO FINANCIAL STATEMENTS 28-35
.
. FINANCIAL HIGHLIGHTS 36-39
.
. REPORT OF INDEPENDENT ACCOUNTANTS
</TABLE>
<PAGE> 93
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 94
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 95
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 96
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 97
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 98
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 99
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 100
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 101
PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ------------ ----- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS--104.5%
CALIFORNIA -- 7.6%
California Health Facilities, Pomona
Valley Hospital Medical Center
(MBIA Insured), Prerefunded on
1/1/00 @102........................ AAA/AAA 6.75% 01/01/07 $250,000 $ 269,375
California State Department of
Veteran Affairs, Home Purchase,
Series A (AMT), Callable on 9/30/97
@101.5............................. Aa2/A+ 7.38% 08/01/12 30,000 30,779
Del Mar California Race Track
Authority.......................... NR/NR 6.00% 08/15/06 250,000 263,437
Del Mar California Race Track
Authority, Callable on 8/15/06
@102............................... NR/NR 6.20% 08/15/11 250,000 264,687
Foothill/Eastern Corridor, California
Toll Road, Senior Lien, Series A,
Callable on 1/1/05 @102............ BAA/BBB- 6.00% 01/01/34 150,000 153,000
West Covina, Certificates of
Participation, Queen of the Valley
Hospital, Callable on 8/15/04
@102............................... A2/A 6.50% 08/15/24 75,000 79,969
----------
1,061,247
----------
COLORADO -- 1.6%
Pueblo County Single Family Mortgage,
Series A, Callable on 6/1/02
@102............................... NR/AA- 6.85% 12/01/25 205,000 216,019
----------
CONNECTICUT -- 0.6%
Connecticut State Clean Water,
Callable on 6/1/04 @102............ AAA/AA+ 5.65% 06/01/10 75,000 78,281
----------
FLORIDA -- 5.7%
Florida State Board of Education,
Capital Outlay, Series A, Callable
on 6/1/07 @101..................... AA2/AA+ 5.00% 06/01/27 500,000 466,250
Florida State Board of Education,
Capital Outlay, Series A, Callable
on 6/1/04 @101..................... Aa2/AA+ 6.10% 06/01/24 75,000 78,750
Jacksonville Electric Authority, St.
John's River, Issue 2, Series 9,
Callable on 10/1/02 @102........... Aa1/AA 5.25% 10/01/21 255,000 245,437
----------
790,437
----------
IDAHO -- 2.4%
Idaho Health Facility Authority,
Daily Variable Rate (Final maturity
5/1/22)*........................... VMIG1/NR 3.65% 09/02/97 335,000 335,000
----------
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 102
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ------------ ---- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
ILLINOIS -- 13.1%
Chicago O'Hare International Airport,
Senior Lien, Series A, Callable on
1/1/04 @102........................ A1/A+ 4.80% 01/01/05 $500,000 $ 492,500
Cook County, Series B (FGIC Insured),
Callable on 11/15/02 @102.......... AAA/AAA 5.50% 11/15/22 300,000 295,125
Illinois Health Facilities Authority,
Elmhurst Memorial Hospital, Series
B, Daily Variable Rate (Final
maturity 1/1/20)*.................. VMIG1/NR 3.70% 01/01/20 100,000 100,000
Illinois Health Facility Authority,
Edward Hospital, Series A, Callable
on 2/15/04 @102.................... A2/A+ 6.00% 02/15/19 75,000 76,219
Illinois Health Facility Authority,
Illinois Masonic Medical Center,
Series A, Callable on 10/1/99
@102............................... A3/A- 7.60% 10/01/07 300,000 321,000
Illinois State Sales Tax Revenue,
Series W (FGIC Insured) Callable on
6/15/06
@101............................... AAA/AAA 5.00% 06/15/16 520,000 491,400
Illinois State Sales Tax Revenue,
Series O, Callable on 6/15/01
@100............................... AA3/AAA 6.00% 06/15/18 50,000 51,250
----------
1,827,494
----------
INDIANA -- 4.4%
Bloomington Indiana Sewer Works (MBIA
Insured), Callable on 1/1/05
@102............................... Aaa/AAA 5.88% 01/01/25 150,000 153,000
Indiana Bond Bank Revolving Fund,
Program A, Callable on 2/1/05
@102............................... NR/A 6.88% 02/01/12 100,000 111,250
Indianapolis Local Public
Improvement, Callable on 3/27/97
@101.5............................. AAA/AAA 7.90% 02/01/07 300,000 352,875
----------
617,125
----------
KENTUCKY -- 3.7%
Kentucky Economic Development, Daily
Variable Rate (Final maturity
11/1/20)*.......................... VMIG1/NR 3.65% 09/02/97 300,000 300,000
Kentucky State Property & Buildings
Refunding Project No. 55........... A/A+ 6.00% 09/01/08 200,000 216,750
----------
516,750
----------
LOUISIANA -- 1.5%
Louisiana State General Obligation
Bond, Series A (MBIA Insured)...... AAA/AAA 5.38% 08/01/05 200,000 208,250
----------
MASSACHUSETTS -- 8.0%
Massachusetts Bay Transportation
Authority, General Transportation
System, Series A, Callable on
3/1/06 @101........................ A1/A+ 5.38% 03/01/16 500,000 499,375
Massachusetts State Housing Finance
Agency, Single Family Housing
Revenue, (MBIA Insured) (AMT),
Callable on 6/1/06 @102............ AAA/AAA 6.25% 12/01/15 500,000 522,500
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 103
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ----------- ---- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Massachusetts State Water Resource
Authority, Series C, Callable on
12/1/04 @102....................... A/A 5.25% 12/01/20 $100,000 $ 96,125
----------
1,118,000
----------
MICHIGAN -- 4.0%
Greater Detroit Resource Recovery
Authority, Series B (AMBAC
Insured)........................... AAA/AAA 6.25% 12/13/05 500,000 550,625
----------
MINNESOTA -- 3.4%
Northern Municipal Power Agency,
Series A, Callable on 1/1/99 @102.. A2/A 7.25% 01/01/16 445,000 468,919
----------
MISSOURI -- 4.0%
Sikeston Electric Revenue, ETM....... AAA/AAA 6.25% 06/01/08 500,000 556,875
----------
NEBRASKA -- 1.3%
Omaha Public Power District, Nebraska
Electric Company, Series C......... AA2/AA 5.50% 02/01/14 175,000 180,250
----------
NEVADA -- 11.1%
Clark County Convention & Visitors
Center (MBIA Insured).............. AAA/AAA 4.80% 07/01/02 500,000 508,125
Clark County Passenger Facilities
Charge, Las Vegas/Macarran
International Airport, Series A,
(MBIA Insured) (AMT) Callable on
7/1/05 @102........................ AAA/AAA 5.75% 07/01/23 500,000 503,125
Nevada Housing Division, Single
Family Mortgage, Series D1,
Callable on 4/1/06 @102............ Aa3/NR 6.25% 04/01/14 500,000 529,375
----------
1,540,625
----------
NEW JERSEY -- 3.8%
New Jersey Economic Development
Authority, Market Transition
Facilities, Series A (MBIA
Insured), Callable on 7/1/04
@102............................... AAA/AAA 5.70% 07/01/05 150,000 159,187
New Jersey State Turnpike Authority,
Series C (AMBAC Insured), Callable
on 1/1/01 @101.5................... AAA/AAA 6.40% 01/01/07 350,000 374,062
----------
533,249
----------
NEW YORK -- 4.4%
New York City, Industrial Development
Agency, Special Facilities Revenue,
Terminal One Group Assistant
Project (AMT), Callable on 1/1/04
@102............................... A/A 6.00% 01/01/15 75,000 77,063
New York State Energy Research and
Development Authority, Electric
Facility Revenue, Series A (AMT),
Callable on 1/1/98 @101.5.......... A1/A+ 7.75% 01/01/24 65,000 66,707
New York State Local Government
Assistance Corp., Series B,
Callable on 4/1/02 @102............ A3/A 6.00% 04/01/18 50,000 51,125
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 104
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ----------- ---- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
New York State Urban Development
Facilities......................... BAA1/BBB 5.75% 04/01/11 $400,000 $ 414,500
----------
609,395
----------
OREGON -- 1.1%
Portland International Airport,
Series 10 (FGIC Insured) (AMT),
Callable on 7/1/05 @101............ AAA/AAA 5.88% 07/01/15 150,000 154,500
----------
PENNSYLVANIA -- 5.4%
Pennsylvania State General Obligation
Bonds, First Series................ A1/AA- 4.88% 05/01/02 250,000 253,750
Philadelphia Airport, Series A (AMBAC
Insured) (AMT), Callable on 6/15/05
@102............................... AAA/AAA 5.70% 06/15/07 200,000 210,500
Philadelphia Wastewater (AMBAC-TCRS
Insured)........................... AAA/AAA 5.50% 06/15/07 250,000 264,688
Pittsburgh Urban Redevelopment
Authority, Home Improvement, Series
A (AMT), Callable on 2/1/04 @102... A/A 5.65% 08/01/15 20,000 20,125
----------
749,063
----------
TENNESSEE -- 4.5%
Humphreys County Industrial
Development Board, E.I. Du Pont De
Nemours and Co. Project (AMT),
Callable on 5/1/04 @102............ AA3/AA- 6.70% 05/01/24 75,000 81,844
Maury County Industrial Development
Board Pollution Control, Callable
on 9/1/04 @102..................... A3/A- 6.50% 09/01/24 500,000 542,500
----------
624,344
----------
TEXAS -- 6.9%
Brazos River Authority, Special
Facilities (FGIC Insured), Callable
on 8/15/05 @100.................... AAA/AAA 5.50% 08/15/15 200,000 200,000
Lower Colorado River Authority,
Junior Lien (AMBAC Insured) ETM,
Callable on 1/1/02 @100............ NR/AAA 6.00% 01/01/17 10,000 10,850
Lower Colorado River Authority,
Junior Lien (AMBAC Insured),
Callable on 1/1/02 @100............ AAA/AAA 6.00% 01/01/17 40,000 40,900
Lower Neches Valley River Treatment
Project, Callable on 2/1/04 @102... AA2/AA 5.65% 02/01/29 600,000 605,250
Texas Water Development Board, State
Revolving Fund, Senior Lien,
Callable on 7/15/02 @102........... AA-1/AAA 6.00% 07/15/13 100,000 104,250
----------
961,250
----------
UTAH -- 3.8%
Ashley Valley Water and Sewer
Implementation District, (AMBAC
Insured)........................... AAA/AAA 9.50% 01/01/08 310,000 387,888
Intermountain Power Agency, Utah
Power Supply, Series C............. A1/A+ 5.25% 07/01/14 150,000 147,000
----------
534,888
----------
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 105
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ----------- ---- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
WASHINGTON -- 1.4%
Washington Health Care Facility
Authority, Fred Hutchinson Cancer
Research Center, Series 1991-B
(LOC -- Morgan Guaranty) (Final
Maturity 1/1/18)*.................. VMIG1/NR 3.65% 09/02/97 $200,000 $ 200,000
----------
WYOMING -- 0.8%
Wyoming Community Development
Authority, Single Family Mortgage,
Series G (AMT), Callable on
11/26/01 @103...................... AA2/AA 7.20% 06/01/10 100,000 108,375
----------
TOTAL INVESTMENTS
(COST $14,067,839) -- 104.5% (a)..... 14,540,961
Liabilities in Excess of Other
Assets -- (4.5%)................... (627,842)
----------
NET ASSETS -- 100.0%.................. $13,913,119
==========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $13,913,119.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $ 482,944
Unrealized depreciation...................................... (9,822)
---------
Net unrealized appreciation.................................. $ 473,122
==========
</TABLE>
* Variable rate security. Maturity date reflects the next interest rate change
date.
AMBAC -- AMBAC Indemnity Corporation.
AMT -- Interest on securities subject to Federal Alternative Minimum Tax.
EFGIC -- Financial Guaranty Insurance Company.
MBIA -- Municipal Bond Insurance Association.
TCRS -- Trust Certificate Receipts.
NR -- No rating assigned by Moody's or S&P.
See Notes to Financial Statements.
14
<PAGE> 106
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ------------------------------------- ------------ ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS -- 99.3%
CALIFORNIA -- 96.0%
ABAG Financial Corporation,
Certificates of Participation,
Series A, Callable on 6/1/00
@102.............................. NR/A 6.25% 06/01/11 $1,000,000 $ 1,036,250
Alameda County Water District Water
Systems Project (FGIC Insured),
Callable on 6/1/04
@102.............................. AAA/AAA 6.00% 06/01/15 2,515,000 2,621,888
Alameda Santa Rita Jail,
Certificates of Participation
(MBIA Insured), Callable on
12/1/03 @102...................... AAA/AAA 5.70% 12/01/14 3,000,000 3,075,000
Bodega Bay Fire Protection District,
Certificate of Participation, Fire
Station Project, Callable on
10/1/14 @102...................... NR/BBB- 6.45% 10/01/31 1,185,000 1,242,769
California Health Facilities
Authority, Adventist Health
Systems, Series A (MBIA Insured),
Callable on 3/1/01
@102.............................. AAA/AAA 7.00% 03/01/13 1,000,000 1,091,250
California Health Facilities
Authority, Adventist Health
Systems West, Series B (MBIA
Insured), Callable on 3/1/01
@102.............................. AAA/AAA 6.50% 03/01/07 1,000,000 1,081,250
California Health Facilities
Authority, Kaiser Permanente
Permanente Medical Care, Series A,
Callable on 12/1/00 @102.......... AA3/AA 6.50% 12/01/20 2,000,000 2,127,500
California Housing Finance Authority
(AMT) (MBIA Insured), Callable on
8/1/07 @102....................... AAA/AAA 5.65% 08/01/17 1,250,000 1,257,812
California Housing Finance Authority
(AMT) (MBIA Insured), Callable on
8/1/07 @102....................... AAA/AAA 5.75% 02/01/29 3,000,000 3,030,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric Co., Series A (AMT),
Callable on 6/1/02 @102........... A2/A+ 6.63% 06/01/09 1,000,000 1,078,750
California Pollution Control
Financing Authority, Shell
Martinez Refining Project, Daily
Variable Rate (Final maturity
10/1/31)*......................... VMIG1/A1+ 3.40% 09/02/97 2,000,000 2,000,000
California Pollution Control
Financing Authority, Southern
California Edison, Series A (AMT),
Callable on 9/1/99 @102........... NR/A+ 6.90% 09/01/06 1,000,000 1,063,750
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 107
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ------------------------------------- ----------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
California Pollution Control
Financing Authority, Southern
California Edison, Series B (AMT),
Callable on 12/1/02 @102.......... A2/A+ 6.40% 12/01/24 $1,000,000 $ 1,045,000
California Public Works Board,
Department of Corrections, Series
A (AMBAC Insured), Callable on
1/1/06............................ AAA/AAA 5.50% 01/01/10 2,000,000 2,080,000
California Public Works Board,
Department of Corrections, State
Prison, Series E, Callable on
6/1/04 @102....................... A/A 5.50% 06/01/19 7,970,000 7,890,300
California State Department of
Water, Central Valley Project,
Series L, Callable on 6/1/03
@101.5............................ AA/AA 5.70% 12/01/16 4,500,000 4,590,000
California State Department of Water
Revenue (Residential Central
Valley Project) Series S, Callable
on 12/1/07 @101................... AA2/AA 5.00% 12/01/17 6,000,000 5,707,500
California State General Obligation
Bond.............................. A-1/A+ 6.75% 04/01/07 2,575,000 2,983,781
California State General Obligation
Bond (AMBAC-TCRS Insured),
Callable on 5/1/04 @102........... AAA/AAA 6.00% 05/01/12 2,645,000 2,807,006
California State General Obligation
Bond (FGIC-TCRS Insured), Callable
on 10/1/05 @101................... AAA/AAA 5.25% 10/01/17 2,600,000 2,531,750
Capital Area Development Authority,
Series A (MBIA Insured) Callable
on 4/1/02 @102.................... AAA/AAA 6.50% 04/01/12 1,000,000 1,088,750
Central Coast Water Authority, State
Water Project, Regal Facility
(AMBAC Insured), Prerefunded
10/1/02 @102...................... AAA/AAA 6.50% 10/01/14 1,750,000 1,951,250
Central Valley Financing Authority,
Cogeneration Project, Carson Ice,
Callable on 7/1/03 @102........... NR/BBB- 6.00% 07/01/09 3,000,000 3,123,750
Chino Unified School District
California Convertible Capital
Appreciation, Certificates of
Participation, Series A (FSA
Insured), Sinking date 9/1/00
@100+............................. AAA/AAA 0.00% 09/01/14 2,000,000 1,842,500
Coachella Valley Water District No.
71, Certificates of Participation,
Flood Control Project, Callable on
10/1/02
@102.............................. A/NR 6.75% 10/01/12 1,000,000 1,073,750
Del Mar Race Track Revenue
Authority......................... NR/NR 6.00% 08/15/06 1,000,000 1,053,750
Del Mar Race Track Revenue
Authority, Callable on 8/15/06
@102.............................. NR/NR 6.00% 08/15/08 1,000,000 1,048,750
Del Mar Race Track Revenue
Authority, Callable on 8/15/06
@102.............................. NR/NR 6.20% 08/15/11 1,000,000 1,058,750
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 108
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ------------------------------------- ----------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
Delta County Home Mortgage Financing
Authority, Single Family
Mortgage,Series A, Callable on
6/1/02 @102....................... NR/AAA 6.75% 12/01/25 $1,790,000 $ 1,883,975
Duarte Certificates of
Participation, City of Hope
National Medical Center, Callable
on 4/1/03 @102.................... BAA1/NR 6.00% 04/01/08 5,000,000 5,168,750
East Bay Municipal Utility District
System (FGIC Insured), Callable on
6/1/06 @102....................... AAA/AAA 5.00% 06/01/16 3,000,000 2,887,500
Eastern Municipal Water District,
Certificates of Participation
(FGIC Insured).................... AAA/AAA 6.75% 07/01/12 1,000,000 1,162,500
Elsinore Valley Municipal Water
District, Certificates of
Participation, Series A (FGIC
Insured).......................... AAA/AAA 6.00% 07/01/12 1,500,000 1,627,500
Emeryville Public Finance Agency,
Emeryville Redevelopment Project,
Series A, Callable on 5/1/02
@102.............................. NR/A- 6.50% 05/01/21 1,500,000 1,588,125
Escondido Joint Powers Financing
Authority, California Center for
the Arts, (AMBAC Insured),
Callable on 9/1/05 @102........... AAA/AAA 6.00% 09/01/18 1,500,000 1,578,750
Foothill/Eastern Transportation
Corridor Agency, California Toll
Road Revenue Bond, Series A,
Callable on 1/1/10 @100........... BAA/BBB- 6.00% 01/01/16 3,000,000 3,112,500
Fremont Public Financing Authority,
Local Improvement District 39R,
Callable on 9/2/97 @102........... NR/NR 6.00% 09/01/11 1,965,000 2,006,422
Fresno Health Facilities Agency,
Holy Cross Health Systems, St.
Agnes Project, Callable on 6/1/02
@102.............................. AA3/AA 6.63% 06/01/21 2,450,000 2,652,125
Fresno Sewer, Series A-1 (AMBAC
Insured).......................... AAA/AAA 6.25% 09/01/14 5,000,000 5,575,000
Industrial Urban Development Tax
Allocation Transportation
District, Project 3, Callable on
11/1/02 @101.75................... NR/A- 6.90% 11/01/16 1,000,000 1,083,750
Irvine Ranch Water District, Joint
Powers Agency, Issue II, Callable
on 8/15/98 @100................... NR/A+ 8.25% 08/15/23 2,400,000 2,489,928
Long Beach Harbor Revenue, (AMT)
(MBIA Insured), Callable on
5/15/05 @102...................... AAA/AAA 5.38% 05/15/20 3,000,000 2,917,500
Los Angeles, Series A, (MBIA
Insured) Callable on 9/1/04 @102.. AAA/AAA 6.00% 09/01/11 2,000,000 2,155,000
Los Angeles Convention & Exhibition
Center Authority, Series A (MBIA
Insured).......................... AAA/AAA 6.00% 08/15/10 3,000,000 3,315,000
Los Angeles County Transportation,
Sales Tax Revenue, Series A,
Callable on 7/1/99 @102........... A-1/AA- 7.40% 07/01/15 2,000,000 2,140,000
Los Angeles County Transportation,
Sales Tax Revenue, Series A,
Prefunded 7/1/01 @102............. AAA/AA- 6.90% 07/01/21 1,100,000 1,222,375
</TABLE>
- ---------------
See Notes to Financial Statements.
17
<PAGE> 109
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ------------------------------------- ----------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
Los Angeles County Transportation,
Sales Tax Revenue, Series B,
Callable on 7/1/01 @102........... A-1/AA- 6.50% 07/01/13 $2,500,000 $ 2,671,875
Los Angeles County, Sanitation
District Financing Authority,
Revenue Capital Projects, Series
A, Callable on 10/1/03 @102....... AA/AA 5.38% 10/01/13 1,500,000 1,513,125
Los Angeles Department of Water and
Power, Callable on 4/15/03 @102... AA/A+ 5.75% 04/15/12 2,000,000 2,052,500
Los Angeles Harbor, Series B (AMT),
Callable on 8/1/02 @102........... AA/AA 6.63% 08/01/25 2,000,000 2,160,000
Los Angeles Waste Water Systems
Revenue, Series A (MBIA Insured),
Callable on 6/1/03
@102.............................. AAA/AAA 5.70% 06/01/20 2,650,000 2,696,375
Manhattan Beach Unified School
District, Certificates of
Participation, Convertible Capital
Appreciation, Series B (MBIA
Insured), Callable on 8/1/05
@102.............................. AAA/AAA 0.00% 08/01/20 2,000,000 1,760,000
Metropolitan Water District,
Southern California Waterworks,
Series A, Callable on 7/1/05 @102
(MBIA Insured).................... AAA/AAA 5.75% 07/01/21 3,000,000 3,075,000
Metropolitan Water District,
Southern California Waterworks,
Series A.......................... AA/AA 5.75% 07/01/21 4,500,000 4,691,250
Natomas Unified School District,
Series A (MBIA Insured), Callable
on 9/1/03 @102.................... AAA/AAA 5.75% 09/01/17 1,000,000 1,021,250
Northern California Transmission,
Ore Transmission Project, Series A
(MBIA Insured), Callable on 5/1/02
@102.............................. AAA/AAA 6.25% 05/01/10 2,000,000 2,152,500
Northridge Water District,
Certificates of Participation
(AMBAC Insured), Callable on
2/1/06 @102....................... AAA/AAA 5.25% 02/01/18 2,500,000 2,446,875
Orange County Community Facilities
District, Special Tax No. 86-1
(FSA Insured), Callable on 8/15/99
@102.............................. AAA/AAA 7.13% 08/15/17 1,500,000 1,606,875
Orange County Community Facilities
District, Special Tax No. 87-4,
Foothill Ranch, Series A,
Prerefunded on 8/15/02 @102....... NR/NR 7.20% 08/15/08 2,000,000 2,282,500
Pasadena Community Multifamily
Housing, Civic Center, Series A
(AMT) (FSA Insured), Callable on
12/1/02 @102...................... AAA/AAA 6.40% 12/01/12 2,500,000 2,615,625
Pleasanton Joint Powers Financing
Authority, Reassessment, Series A,
Callable on 9/2/03 @102........... BAA3/NR 6.15% 09/02/12 35,000 36,881
Port Oakland, Series H (AMT) (MBIA
Insured), Callable on 11/1/07
@102.............................. AAA/AAA 5.50% 11/01/15 5,000,000 4,987,500
</TABLE>
- ---------------
See Notes to Financial Statements.
18
<PAGE> 110
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ------------------------------------- ----------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
Poway Certificates of Participation,
Poinsettia Mobilehome Park (FSA
Insured), Callable on 6/1/02
@102.............................. AAA/AAA 6.38% 06/01/18 $2,500,000 $ 2,665,625
Rancho Water District Financing
Authority (AMBAC Insured),
Callable on 8/15/01 @101.5........ AAA/AAA 6.40% 08/15/04 1,000,000 1,090,000
Rancho Water District Financing
Authority (FGIC Insured), Callable
on 11/1/05 @102................... AAA/AAA 5.90% 11/01/15 2,000,000 2,097,500
Sacramento Power Authority
Cogeneration Project, Callable on
7/1/06 @102....................... NR/BBB- 5.88% 07/01/15 2,900,000 2,958,000
San Diego County Water Authority,
Certificates of Participation,
Series A, Callable on 5/1/01
@102.............................. AA/AA- 6.40% 05/01/08 2,000,000 2,145,000
San Diego Industrial Development,
San Diego Gas & Electric, Series
A, Callable on 9/1/02
@102.............................. A-1/A+ 6.40% 09/01/18 1,500,000 1,590,000
San Diego Special Tax Community
Facilities District No. 1, Series
B, Callable on 9/1/05 @102........ NR/NR 7.00% 09/01/15 2,000,000 2,115,000
San Francisco Bay Area Rapid Transit
District (FGIC Insured), Callable
on 7/1/05 @101.................... AAA/AAA 5.50% 07/01/20 1,095,000 1,092,263
San Francisco Building Authority,
General Service, Series A (MBIA-
IBC Insured)...................... AAA/AAA 5.00% 10/01/08 1,000,000 1,021,250
San Francisco City & County Airport,
Second Series Issue 2 (MBIA
Insured), Callable on 5/1/03
@102.............................. AAA/AAA 6.75% 05/01/13 1,730,000 1,933,275
San Francisco City & County Public
Utilities, Callable on 11/1/02
@100.............................. AA/AA- 6.00% 11/01/15 1,000,000 1,027,500
San Francisco City & County School
District, Facilities Improvements
Projects, Series C (FGIC Insured),
Callable on 6/15/02 @102.......... AAA/AAA 6.30% 06/15/14 2,000,000 2,152,500
San Francisco City & County,
Community International Airport,
Second Series Issue 10 A (AMT)
(MBIA Insured), Callable on 5/1/06
@102.............................. AAA/AAA 5.70% 05/01/26 3,000,000 3,018,750
San Joaquin County Certificates of
Participation, Capital Facilities
Project (MBIA Insured)............ AAA/AAA 5.50% 11/15/13 1,750,000 1,802,500
San Joaquin Transit Corridor Agency,
Senior Lien, Callable on 1/1/03
@102.............................. NR/NR 7.00% 01/01/30 2,500,000 2,696,875
San Jose Financing Authority,
Convention Center, Series C,
Callable on 9/1/01 @102........... A-1/A+ 6.40% 09/01/17 3,000,000 3,176,250
San Jose Redevelopment Agency, Tax
Allocation, Merged Area
Redevelopment Project (MBIA
Insured).......................... AAA/AAA 6.00% 08/01/15 3,670,000 4,000,300
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 111
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ------------------------------------- ----------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
Santa Ana Financing Authority,
Police Administration and Holding
Facility, Series A (MBIA Insured),
Callable on 7/1/04 @102........... AAA/AAA 5.63% 07/01/09 $1,130,000 $ 1,187,913
Santa Clara County Transit Sales
Tax, Series A, Callable on 12/1/00
@102.............................. A-1/AA 6.75% 06/01/11 1,000,000 1,080,000
Santa Clarita Public Financing
Authority, Callable on 10/1/01
@102.............................. NR/A- 6.75% 10/01/21 1,000,000 1,110,000
Scotts Valley Unified School
District, Series B, Callable
8/1/05 @102....................... AAA/NR 5.38% 08/01/17 1,295,000 1,280,431
Southern California Public Power
Authority, Power Project.......... A/A 6.75% 07/01/13 1,000,000 1,138,750
Southern California Rapid Transit
District Certificates of
Participation, Workers
Compensation Fund (MBIA Insured),
Callable on 1/1/01 @102.5......... AAA/AAA 6.00% 07/01/10 1,000,000 1,058,750
Thousand Oaks Redevelopment Agency,
Thousand Oaks Boulevard
Redevelopment (MBIA Insured),
Callable on 12/1/05 @102.......... AAA/AAA 5.25% 12/01/08 1,370,000 1,419,663
Thousand Oaks Redevelopment Agency,
Thousand Oaks Boulevard
Redevelopment (MBIA Insured),
Callable on 12/1/05 @102.......... AAA/AAA 5.40% 12/01/09 1,290,000 1,341,600
Turlock Industrial Refunded Revenue
District, Series A (MBIA
Insured).......................... AAA/AAA 6.00% 01/01/09 2,000,000 2,197,500
Union City Community Redevelopment
Agency, Tax Allocation
Redevelopment Project (AMBAC
Insured), Callable on 10/1/03
@102.............................. AAA/AAA 5.85% 10/01/23 1,250,000 1,281,250
University of California, Hospital
Medical Center (AMBAC Insured),
Callable on 7/1/06
@101.............................. AAA/AAA 5.75% 07/01/24 5,000,000 5,112,500
University of California, Hospital
Medical Center (AMBAC Insured),
Callable on 7/1/06
@101.............................. AAA/AAA 6.00% 07/01/26 3,500,000 3,688,125
University of California, Research
Facilities, Series B, Callable on
9/1/03 @102....................... NR/A 6.30% 09/01/15 2,500,000 2,615,625
West & Central Basin Financing
Authority (AMBAC Insured),
Prerefunded on 8/1/02 @102........ AAA/AAA 6.13% 08/01/12 965,000 1,057,881
West & Central Basin Financing
Authority (AMBAC Insured),
Callable on 8/1/02 @102........... AAA/AAA 6.13% 08/01/12 1,035,000 1,134,619
West Covina Redevelopment Agency,
Community Facilities Special Tax,
Fashion Plaza..................... NR/A 6.00% 09/01/17 3,000,000 3,172,500
Westwood Unified School District,
Callable on 8/1/06 @102........... NR/BBB 6.50% 08/01/21 1,025,000 1,051,906
------------
212,431,238
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
20
<PAGE> 112
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ------------------------------------- ----------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
PUERTO RICO -- 3.3%
Puerto Rico Electric Power
Authority, Series P, Prerefunded
on 7/1/01 @102.................... AAA/A- 7.00% 07/01/11 $2,000,000 $ 2,230,000
Puerto Rico Electric Power
Authority, Series U, Callable on
7/1/04 @102....................... BAA1/BBB+ 6.00% 07/01/14 5,000,000 5,206,250
------------
7,436,250
------------
TOTAL INVESTMENTS
(COST $208,016,116)(A) -- 99.3%..... 219,867,488
Other Assets in Excess of
Liabilities -- 0.7%............... 1,473,572
------------
NET ASSETS -- 100.0%................ $221,341,060
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $221,341,060
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................. $12,082,928
Unrealized depreciation.................................. (231,556)
-----------
Net unrealized appreciation.............................. $11,851,372
===========
</TABLE>
+ -- Zero coupon bonds.
AMBAC -- AMBAC Indemnity Corporation.
AMT -- Interest on securities subject to Federal Alternative Minimum Tax.
FGIC -- Financial Guaranty Insurance Company.
FSA -- Financial Security Assurance, Inc.
MBIA -- Municipal Bond Insurance Association.
TCRS -- Trust Certificate Receipts.
NR -- No rating assigned by Moody's or S&P.
See Notes to Financial Statements.
21
<PAGE> 113
PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $14,067,839)............... $14,540,961
Cash................................................................. 96,277
Interest receivable.................................................. 180,261
Receivable for capital shares sold................................... 10,620
Receivable from investment advisor................................... 3,943
Prepaid expenses..................................................... 3,480
Deferred organizational costs........................................ 15,955
------------
Total Assets........................................................... 14,851,497
------------
LIABILITIES:
Dividends payable.................................................... 55,591
Payable for investment securities purchased.......................... 726,060
Payable for capital shares redeemed.................................. 98,788
Custodian and fund accounting fees payable........................... 20,039
Transfer agent fees payable.......................................... 8,511
Other accrued expenses............................................... 29,389
------------
Total Liabilities...................................................... 938,378
------------
NET ASSETS............................................................. $13,913,119
============
NET ASSETS:
A Shares............................................................. $13,912,032
K Shares............................................................. 1,087
------------
Total.................................................................. $13,913,119
============
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares............................................................. 1,351,464
K Shares............................................................. 106
------------
Total.................................................................. 1,351,570
============
NET ASSET VALUE
A Shares -- redemption price per share............................... $10.29
======
Maximum Sales Charge (A Shares)...................................... 4.50%
Maximum Offering Price (A Shares)
(Net Asset Value of A Shares/ (100%-Maximum Sales Charge))......... $10.77
======
K Shares -- offering and redemption price per share.................. $10.29
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par....................................... $ 1,351
Additional paid-in capital........................................... 13,411,875
Accumulated undistributed net investment income...................... 5,282
Accumulated net realized gains on investment transactions............ 21,489
Net unrealized appreciation on investments........................... 473,122
------------
NET ASSETS, AUGUST 31, 1997............................................ $13,913,119
============
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 114
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $208,016,116)............. $219,867,488
Cash................................................................ 308,031
Interest receivable................................................. 3,262,839
Receivable for capital shares sold.................................. 146,500
Prepaid expenses.................................................... 6,344
------------
Total Assets.......................................................... 223,591,202
------------
LIABILITIES:
Dividends payable................................................... 879,662
Payable for investment securities purchased......................... 1,050,000
Payable for capital shares redeemed................................. 66,174
Investment advisory fees payable.................................... 53,779
Administration fees payable......................................... 40,335
Shareholder service fees payable (A and K Shares)................... 47,057
Custodian and fund accounting fees payable.......................... 22,606
Transfer agent fees payable......................................... 41,093
Legal fees payable.................................................. 6,098
Other accrued expenses.............................................. 40,338
Other payables...................................................... 3,000
------------
Total Liabilities..................................................... 2,250,142
------------
NET ASSETS............................................................ $221,341,060
============
Net Assets:
A Shares............................................................ $221,339,976
K Shares............................................................ 1,084
------------
Total................................................................. $221,341,060
============
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares............................................................ 29,720,030
K Shares............................................................ 145
------------
Total................................................................. 29,720,175
============
NET ASSET VALUE
A Shares -- redemption price per share.............................. $7.45
=====
Maximum Sales Charge (A Shares)..................................... 4.50%
Maximum Offering Price (A Shares)
(Net Asset Value of A Shares/ (100%-Maximum Sales Charge))........ $7.80
=====
K Shares -- offering and redemption price per share................. $7.45
=====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par...................................... $ 29,720
Additional paid-in capital.......................................... 208,751,279
Accumulated undistributed net investment income..................... 188,743
Accumulated net realized gains on investment transactions........... 519,946
Net unrealized appreciation on investments.......................... 11,851,372
------------
NET ASSETS, AUGUST 31, 1997........................................... $221,341,060
============
</TABLE>
- ---------------
See Notes to Financial Statements.
23
<PAGE> 115
PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................... $ 377,846
--------
EXPENSES:
Investment advisory fees............................................. 24,343
Administration fees.................................................. 13,910
Shareholder service fees (A and K Shares)............................ 17,388
Custodian and fund accounting fees................................... 8,346
Transfer agent fees.................................................. 18,927
Legal fees........................................................... 30
Other expenses....................................................... 30,767
--------
Total Expenses................................................. 113,711
Less: Fee waivers and reimbursements................................... (78,025)
Expenses paid by third parties......................................... (911)
--------
Total Net Expenses..................................................... 34,775
--------
NET INVESTMENT INCOME.................................................. 343,071
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gain on investment transactions......................... 25,513
Net change in unrealized appreciation on investments................. 90,533
--------
Net realized/unrealized gains on investments........................... 116,046
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $ 459,117
========
</TABLE>
- ---------------
See Notes to Financial Statements.
24
<PAGE> 116
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $ 6,348,289
----------
EXPENSES:
Investment advisory fees............................................. 442,506
Administration fees.................................................. 331,880
Shareholder service fees (A and K Shares)............................ 276,569
12b-1 fees (K Shares)................................................ 4
Custodian and fund accounting fees................................... 54,856
Transfer Agent fees.................................................. 62,796
Legal fees........................................................... 9,022
Other expenses....................................................... 62,449
----------
Total Expenses................................................. 1,240,082
Less: Fee waivers...................................................... (221,254)
Expenses paid by third parties......................................... (9,006)
----------
Total Net Expenses..................................................... 1,009,822
----------
NET INVESTMENT INCOME.................................................. 5,338,467
----------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gain on investment transactions......................... 526,922
Net change in unrealized appreciation on investments................. 2,381,713
----------
Net realized/unrealized gains on investments........................... 2,908,635
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $ 8,247,102
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
25
<PAGE> 117
PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
----------- ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................ $ 343,071 $ 696,493
Net realized gains on investment transactions.... 25,513 20,105
Net change in unrealized appreciation on
investments.................................... 90,533 107,766
----------- -----------
Change in net assets resulting from operations..... 459,117 824,364
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares....................................... (343,046) (691,409)
K Shares....................................... (25) (28)(a)
Net realized gains from investment transactions:
A Shares....................................... -- (43,317)
K Shares....................................... -- (3)(a)
----------- -----------
Change in net assets from shareholder
distributions.................................... (343,071) (734,757)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued...................... 2,457,593 7,848,104
Dividends reinvested............................. 251,592 512,621
Cost of shares redeemed.......................... (4,326,816) (5,278,031)
----------- -----------
Change in net assets from capital share
transactions..................................... (1,617,631) 3,082,694
----------- -----------
Change in net assets............................... (1,501,585) 3,172,301
NET ASSETS
Beginning of Period.............................. 15,414,704 12,242,403
----------- -----------
End of Period (including undistributed net
investment income of $5,282 and $5,282,
respectively).................................. $13,913,119 $15,414,704
=========== ===========
</TABLE>
- ------------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
26
<PAGE> 118
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
----------------- ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................ $ 5,338,467 $ 10,448,373
Net realized gains on investment transactions.... 526,922 358,663
Net change in unrealized
appreciation(depreciation) on investments...... 2,381,713 (1,868,867)
------------ ------------
Change in net assets resulting from operations... 8,247,102 8,938,169
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares....................................... (5,338,442) (10,448,345)
K Shares....................................... (25) (28)(a)
Net realized gains from investment transactions:
A Shares....................................... -- (1,489,041)
K Shares....................................... -- (7)(a)
------------ ------------
Change in net assets from shareholder
distributions.................................... (5,338,467) (11,937,421)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued...................... 23,171,364 43,958,663
Dividends reinvested............................. 2,992,934 6,765,701
Cost of shares redeemed.......................... (28,842,711) (47,755,621)
------------ ------------
Change in net assets from capital share
transactions..................................... (2,678,413) 2,968,743
------------ ------------
Change in net assets............................... 230,222 (30,509)
NET ASSETS
Beginning of Period.............................. 221,110,838 221,141,347
------------ ------------
End of Period (Including undistributed net
investment income of $188,743 and $188,743,
respectively.)................................. $ 221,341,060 $221,110,838
============ ============
</TABLE>
- ------------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
27
<PAGE> 119
PACIF IC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon National
Municipal Bond Fund (the "National Municipal Bond Fund") and the Pacific Horizon
California Tax-Exempt Bond Fund (the "California Tax-Exempt Bond Fund"),
collectively the "Funds", individually the "Fund". The Funds offer A Shares and
K Shares. A Shares have a Shareholder Services Plan while K Shares have a
Distribution Plan and Administrative and Shareholder Services Plan.
The Funds seek to achieve a high level of current income exempt from Federal
income tax and in the case of the California Tax-Exempt Bond Fund, exempt from
California State personal income tax as well, as is consistent with prudent
investment management and preservation of capital.
Prior to July 1, 1996, the National Municipal Bond Fund sought to achieve
its investment objective by investing substantially all of its assets in the
National Municipal Bond Portfolio of the Master Investment Trust, Series II (the
"Portfolio"), an open-end management investment company that had the same
investment objective as that of the National Municipal Bond Fund. Effective July
1, 1996, the National Municipal Bond Fund withdrew its investment in the
Portfolio and began investing its assets directly in investment securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Funds' investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC
28
<PAGE> 120
has agreed to provide certain sub-administration services to the Funds,
including, among other things, assisting in the developing and monitoring of
compliance procedures, participating in periodic updating of the Funds'
prospectuses and statements of additional information, providing periodic
reports to the Company's Board and providing certain record-keeping services.
Bank of America will bear all fees and expenses charged by PFPC for such
services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The Funds value portfolio securities each business day through the use of an
independent pricing service approved by the Board of Directors. When, in the
judgement of the pricing service, quoted bid prices for portfolio securities are
readily available and are representative of the bid side of the market, these
investments are valued at the mean between quoted bid prices (as obtained by the
pricing service from dealers in such securities) and ask prices (as calculated
by the pricing service based upon its evaluation of the market for such
securities). Other investments are carried at fair value as determined by the
pricing service, through the use of electronic data processing techniques and
matrix systems. Restricted securities for which market quotations are not
readily available, if any, are valued at fair value using methods approved by
the Board of Directors. Securities with remaining maturities of 60 days or less
are valued at amortized cost, which approximates market value.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premiums, is accrued
daily. Realized gains and losses from security
29
<PAGE> 121
transactions are recorded on an identified cost basis. Securities purchased or
sold on a when-issued or delayed delivery basis may be settled a month after the
trade date.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
The National Municipal Bond Fund incurred certain costs in connection with
its organization. Such costs have been deferred and are being amortized by the
Fund on a straight line basis over five years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income is declared as a dividend daily, and paid
monthly, to shareholders of record at the close of business on record date. Net
realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent net realized gains of the Funds can be offset
by capital loss carryovers of the Funds, such gains will not be distributed.
Dividends and distributions are recorded by the Funds on the ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
------------- --------------
<S> <C> <C>
National
Municipal
Bond Fund.... $ 226 $ --
California
Tax-Exempt
Bond Fund.... 188,743 (170,569)
</TABLE>
30
<PAGE> 122
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
Capital losses incurred after October 31, for the Funds are deemed to arise
on the first business day of the following fiscal year for tax purposes. The
National Municipal Bond Fund and California Tax-Exempt Bond Fund have incurred
and elected to defer such capital losses of $4,041 and $6,976 after October 31,
1996, respectively.
OTHER:
The National Municipal Bond Fund and the California Tax-Exempt Bond Fund
maintain a cash balance with their custodian and receive a reduction of their
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, 1997, custodian fees and expenses paid by third parties were increased by
$9,006 and $911, respectively. There was no effect on net investment income. The
Funds could have invested such cash amounts in income producing assets if they
had not agreed to a reduction of fees or expenses under the expense offset
arrangement with their custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America. For
the six months ended August 31, 1997, the Funds had an Administration Agreement
with BISYS and a Distribution Agreement with the Distributor. Pursuant to the
terms of the Investment Advisory Agreement, Bank of America is entitled to a fee
from the Funds, which is accrued daily and payable monthly, at an annual rate of
0.35% and 0.40% of the National Municipal Bond Fund's and California Tax-Exempt
Bond Fund's average daily net assets, respectively. Pursuant to the terms of the
Administration Agreement, BISYS is entitled to a fee from the Funds, which is
accrued daily and payable monthly, at an annual rate of 0.20% and 0.30% of the
average daily net assets of the National Municipal Bond Fund and California Tax-
Exempt Bond Fund, respectively. Bank of America and BISYS voluntarily waived a
portion of their respective fees. The amount of such waivers totaled $24,343 and
$13,910 for the National Municipal Bond Fund and $126,430 and $94,822 for the
California Tax-Exempt Bond Fund, respectively. For the six months ended August
31, 1997, Bank of America reimbursed $22,383 of operating expenses of the
National Municipal Bond Fund.
For the six months ended August 31, 1997, the Distributor advised the Funds
that it retained $1,944 and $7,406 from commissions earned on sales of the
National Municipal Bond Fund's and California Tax Exempt Bond Fund's shares,
respectively. For the same period, Bank of America and its affiliates advised
the
31
<PAGE> 123
Funds that they retained $15,499 and $55,151, respectively, from commissions
earned on sales of the National Municipal Bond Fund's and California Tax-Exempt
Bond Fund's shares, respectively.
The Funds have a Shareholder Services Plan (the "Plan") under which each
Fund pays for shareholder servicing expenses related to the Funds' shares. Under
the Plan, payments for shareholder servicing expenses may not exceed 0.25% of
each Fund's average daily net assets for A Shares. For the six months ended
August 31, 1997, the National Municipal Bond Fund and California Tax-Exempt Bond
Fund incurred charges of $17,388 and $276,569, respectively, pursuant to the
Plan. The Funds were advised that of these amounts, the Distributor retained
$113,667, from the California Tax-Exempt Bond Fund, and affiliates of Bank of
America retained $149,389 from the California Tax-Exempt Bond Fund. The Plan
provides that if, in any month, the fees paid to the Distributor are less than
the costs incurred by the Distributor, the excess costs will be included in
future computations of the fee, provided that any excess costs will not be
carried forward beyond the end of the fiscal year in which such excess costs
were incurred. For the six months ended August 31, 1997, the Distributor waived
$17,388 for the National Municipal Bond Fund.
The Funds have adopted a Distribution Plan and an Administrative and
Shareholder Services Plan (the "Administrative Plan") with respect to K Shares
of the Funds. Under the Distribution Plan, the Funds pay the Distributor for
expenses primarily intended to result in the sale of the Funds' K Shares. Under
the Distribution Plan, payments by the Funds for the distribution expenses may
not exceed 0.75% of the average daily net assets of each Fund's K Shares.
Payments for distribution expenses under the Distribution Plan are subject to
Rule 12b-1 under the Act. Under the Administrative Plan, the Funds pay for
expenses incurred in connection with shareholder services provided by the
Distributor and payments to Service Organizations for the provision of support
services with respect to beneficial owners of K Shares. Under the Administrative
Plan, payments for shareholder services and administrative services may not
exceed 0.25% and 0.75%, respectively, of the average daily net assets of each
Fund's K Shares. The total of all payments under the Distribution Plan and the
Administrative Plan may not exceed, in the aggregate, the annual rate of 1.00%
of the average daily net assets of each Fund's K Shares.
BISYS Ohio serves the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $18,016 and $62,796 from the National
Municipal Bond Fund and California Tax-Exempt Bond Fund, respectively, for the
six months ended August 31, 1997.
For the six months ended August 31, 1997, the National Municipal Bond Fund
and California Tax-Exempt Bond Fund incurred legal charges totaling $30 and
$9,022, respectively, which were earned by a law firm, a partner of which serves
as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
32
<PAGE> 124
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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 pursuant to the Retirement Plan
amounted to $184 and $1,062 for the National Municipal Bond Fund and California
Tax-Exempt Bond Fund, respectively, for the six months ended August 31, 1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of the National Municipal Bond Fund's portfolio securities
(excluding short-term investments) amounted to $3,659,542 and $4,427,316,
respectively, and the cost of purchases and the proceeds from sales of
California Tax-Exempt Bond Fund's portfolio securities (excluding short-term
investments) amounted to $37,573,226 and $37,875,613, respectively.
33
<PAGE> 125
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Funds are summarized below:
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL BOND FUND
-----------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------ -------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued............................... 240 $2,458 784 $7,850
Reinvested........................... 25 251 51 513
Redeemed............................. (487) (4,327) (527) (5,278)
---- ------ ---- ------
Net increase/(decrease)................ (162) $(1,618) 308 $3,085
==== ====== ==== ======
K Shares
Issued............................... -- $ -- 100 $1,000
Reinvested........................... 3 25 3 28
Redeemed............................. -- -- -- --
---- ------ ---- ------
Net increase........................... 3 $ 25 103 $1,028(a)
==== ====== ==== ======
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT BOND FUND
-----------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------ -------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued............................... 3,165 $23,172 6,009 $43,958
Reinvested........................... 408 2,993 926 6,766
Redeemed............................. (3,938) (28,843) (6,548) (47,756)
------ ------- ------ -------
Net increase/(decrease)................ (365) $(2,678) 387 $2,968
====== ======= ====== =======
K Shares
Issued............................... -- $ -- 138 $1,000
Reinvested........................... 3 25 4 31
Redeemed............................. -- -- -- --
------ ------ ------ -------
Net increase........................... 3 $ 25 142 $1,031(a)
====== ====== ====== =======
</TABLE>
- ------------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
NOTE 7--CONCENTRATION OF CREDIT RISK
The California Tax-Exempt Bond Fund invests substantially all of its assets
in a diversified portfolio of tax-exempt debt obligations primarily consisting
of issuers in the State of California. The issuers' ability to meet their
obligations may be affected by California economic or political developments.
34
<PAGE> 126
The National Municipal Bond Fund invests substantially all of its assets in
debt obligations issued by or on behalf of states, territories and possessions
of the United States, the District of Columbia, and their respective
authorities, agencies, instrumentalities, and political sub-divisions.
The Funds had the following concentrations by type of obligation at August
<TABLE>
<CAPTION>
31, 1997 (as a percentage of total investments).
NATIONAL CALIFORNIA
MUNICIPAL TAX- EXEMPT
BOND BOND
--------- ----------
<S> <C> <C>
Air Transportation........................................ --% 2.3%
Airport Facilities........................................ 8.4 0.9
Certificates of Participation............................. 0.5 2.1
Education................................................. 3.2 3.3
General Obligations....................................... 5.7 3.4
Health & Medical Facilities............................... 5.6 4.6
Home Building and Land Development........................ 1.4 3.1
Hospital Supplies......................................... 4.6 2.3
Industrial Development.................................... 4.3 1.9
Leases.................................................... 1.8 1.5
Leasing................................................... -- 1.8
Miscellaneous............................................. 3.5 --
Pollution Control Revenue & Industrial Development........ -- 9.6
Power Projects............................................ -- 1.9
Property Redevelopment.................................... 1.5 1.4
Public Facilities......................................... -- 5.6
Revenue................................................... 40.7 35.4
Sewer Projects............................................ 1.1 1.2
Transportation............................................ 4.7 3.7
Utilities................................................. 8.2 2.4
Water & Power Projects.................................... 4.8 11.6
----- -----
100.0% 100.0%
===== =====
</TABLE>
35
<PAGE> 127
PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD
AUGUST 31 -------------------------------------------- ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(A) 1997 1997 1994(B)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD................. $ 10.18 $ 10.15 $ 9.64 $ 9.89 $ 10.00
------ ------- ----- ------ -------
Income from investment operations:
Net investment income............... 0.25 0.50 0.54 0.50 0.01
Net realized and unrealized
gains/(losses) on investment
transactions...................... 0.11 0.06 0.51 (0.25) (0.11)
------ ------- ----- ------ -------
Total income/(loss) from investment
operations.......................... 0.36 0.56 1.05 0.25 (0.10)
Less Dividends and Distributions:
Dividends to shareholders from net
investment income................. (0.25) (0.50) (0.54) (0.50) (0.01)
Dividends to shareholders from net
realized gains on investment
transactions...................... -- (0.03) -- -- --
------ ------- ----- ------ -------
Total Dividends and Distributions.... (0.25) (0.53) (0.54) (0.50) (0.01)
------ ------- ----- ------ -------
Net change in net asset value per
share............................... 0.11 0.03 0.51 (0.25) (0.11)
------ ------- ----- ------ -------
NET ASSET VALUE PER SHARE, END OF
PERIOD.............................. $ 10.29 $ 10.18 $ 10.15 $ 9.64 $ 9.89
====== ======= ===== ====== =======
Total return (excludes sales
charge)............................. 3.60%(c) 5.66% 11.16% 2.78% (1.00%)(c)
Ratios/Supplemental Data:
Net assets at end of period (000)... $13,912 $ 15,414 $ 12,242 $ 2,520 $ 733
Ratio of expenses to average net
assets............................ 0.50%(d) 0.49% 0.12% 0.00% 0.00%(d)
Ratio of net investment income to
average net assets................ 4.93%(d) 4.96% 5.24% 5.30% 1.15%(d)
Ratio of expenses to average net
assets*........................... 1.62%(d) 2.22%** 2.71% 17.46% 170.99%(d)
Ratio of net investment
income/(loss) to average net
assets*........................... 3.81%(d) 3.25% 2.65% (12.16%) (169.84%)(d)
Portfolio turnover rate............. 26%(c) 12% 38% 20% 15%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the year ended February 28, 1997 and February 29, 1996, the Portfolio
received credits from its custodian for interest earned on uninvested
balances which were used to offset custodian fees and expenses. If such
credits had not occurred, the expense ratios would have been as indicated.
The ratio of net investment income was not affected.
(a) As of July 22, 1996, the Fund designated the existing series of shares as
"A" Shares.
(b) Period from January 28, 1994 (inception date) to February 28, 1994.
(c) Not annualized.
(d) Annualized.
See Notes to Financial Statements.
36
<PAGE> 128
PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(A)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 10.18 $ 9.96
------- -------
Income from Investment Operations:
Net investment income.............................. 0.25 0.28
Net realized and unrealized gains on investment
transactions..................................... 0.11 0.25
------- -------
Total income from investment operations.............. 0.36 0.53
------- -------
Less: Dividends and Distributions:
Dividends to shareholders from net investment
income........................................... (0.25) (0.28)
Distributions to shareholders from net realized
gains on investment transactions................. -- (0.03)
------- -------
Total Dividends and Distributions.................... (0.25) (0.31)
------- -------
Net change in net asset value per share.............. 0.11 0.22
------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 10.29 $ 10.18
======= =======
Total return......................................... 3.60%(b) 5.38%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000).................... $ 1 $ 1
Ratio of expenses to average net assets.............. 0.75%(c) 0.76%(c)
Ratio of net investment income to average net
assets............................................. 4.66%(c) 4.54%(c)
Ratio of expenses to average net assets*............. 2.05%(c) 1.68%(c)**
Ratio of net investment income to average net
assets*............................................ 3.36%(c) 3.62%(c)
Portfolio turnover rate.............................. 26%(b) 12%
</TABLE>
- ---------------
* 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.
** Fees paid by third parties had no effect on the ratios.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
37
<PAGE> 129
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(A) 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 7.35 $ 7.45 $ 7.12 $ 7.49 $ 7.51 $ 7.07
----- ----- ----- ----- ----- -----
Income from Investment Operations:
Net investment income............. 0.18 0.36 0.37 0.38 0.38 0.43
Net realized and unrealized gains
(losses) on investment
transactions.................... 0.10 (0.05) 0.33 (0.37) 0.04 0.52
----- ----- ----- ----- ----- -----
Total income from investment
operations........................ 0.28 0.31 0.70 0.01 0.42 0.95
Less Dividends and Distributions:
Dividends to shareholders from net
investment income............... (0.18) (0.36) (0.37) (0.38) (0.38) (0.43)
Dividends to shareholders from net
realized gains on investment
transactions.................... -- (0.05) -- -- (0.06) (0.08)
----- ----- ----- ----- ----- -----
Total Dividends and
Distributions..................... (0.18) (0.41) (0.37) (0.38) (0.44) (0.51)
----- ----- ----- ----- ----- -----
Net change in net asset value per
share............................. 0.10 (0.10) 0.33 (0.37) (0.02) 0.44
----- ----- ----- ----- ----- -----
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 7.45 $ 7.35 $ 7.45 $ 7.12 $ 7.49 $ 7.51
===== ===== ===== ===== ===== =====
Total return (excludes sales
charge)........................... 3.85%(b) 4.29% 10.12% 0.36% 5.65% 14.01%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 221 $ 221 $ 221 $ 195 $ 245 $ 189
Ratio of expenses to average net
assets.......................... 0.91%(c) 0.90% 0.94% 0.95% 0.96% 0.62%
Ratio of net investment income to
average
net assets...................... 4.83%(c) 4.88% 5.11% 5.43% 4.96% 5.95%
Ratio of expenses to average net
assets*......................... 1.11%(c) 1.10%** 1.14% 1.15% 1.11% 1.14%
Ratio of net investment income to
average net assets*............. 4.63%(c) 4.68% 4.91% 5.23% 4.81% 5.43%
Portfolio turnover rate............ 17%(b) 34% 57% 20% 15% 32%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the year ended February 28, 1997, the Portfolio received credits from
its custodian for interest earned on uninvested balances which were used to
offset custodian fees and expenses. If such credits had not occurred, the
expense ratios would have been as indicated. The ratio of net investment
income was not affected.
(a) As of July 22, 1996, the Fund designated the existing series of shares as
"A" Shares.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
38
<PAGE> 130
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(A)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 7.35 $ 7.25
------- -------
Income from Investment Operations:
Net investment income.............................. 0.18 0.20
Net realized gains/(losses) on investment
transactions..................................... 0.10 0.15
------- -------
Total income from investment operations.............. 0.28 0.35
Less: Dividends and Distributions:
Dividens to shareholders from net investment
income........................................... (0.18) (0.20)
Distributions to shareholders from net realized
gains on investment transactions................. -- (0.05)
------- -------
Total Dividends and Distributions.................... (0.18) (0.25)
------- -------
Net change in net asset value per share.............. 0.10 0.10
------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 7.45 $ 7.35
======= =======
Total return......................................... 3.85%(b) 4.90%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000).................... $ 1 $ 1
Ratio of expenses to average net assets.............. 1.12%(c) 1.21%(c)
Ratio of net investment income to average
net assets....................................... 4.68%(c) 4.51%(c)
Ratio of expenses to average net assets*............. 1.31%(c) 1.56%(c)
Ratio of net investment income to average net
assets*............................................ 4.49%(c) 4.16%(c)
Portfolio turnover rate.............................. 17%(b) 34%
</TABLE>
- ---------------
* 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.
** Fees paid by third parties had no effect on the ratios.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
39
<PAGE> 131
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 132
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
[PACIFIC HORIZON FUNDS LOGO]
Provident Distributor, Inc., Distributor
TXI-0015 10/97
<PAGE> 133
PACIFIC HORIZON TAX-EXEMPT MONEY MARKET FUNDS
SEMI-ANNUAL REPORT
August 31, 1997
Tax-Exempt Money Fund
California Tax-Exempt Money Market Fund
Investing For All
The Times Of Your Life
NOT FDIC INSURED
PACIFIC HORIZON TAX-EXEMPT MONEY MARKET FUNDS
<PAGE> 134
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 135
CONTENTS
<TABLE>
<S> <C>
. FUND FACTS 2-3
.
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
.
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
.
. PORTFOLIO OF INVESTMENTS 10-28
.
. STATEMENTS OF ASSETS
. AND LIABILITIES 29
.
. STATEMENTS OF OPERATIONS 30
.
. STATEMENTS OF CHANGES
. IN NET ASSETS 31
.
. NOTES TO FINANCIAL STATEMENTS 32-39
.
. FINANCIAL HIGHLIGHTS 40-47
</TABLE>
<PAGE> 136
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 137
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 138
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 139
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 140
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 141
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 142
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 143
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 144
PACIFIC HORIZON TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ---------- ---------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 104.2%
ALABAMA -- 0.8%
Mobile, Port City Medical Clinic
(LOC -- Rabobank Nederland)... VMIG1/Aaa A1+/AAA 3.70% 10/16/97 $ 4,900,000 $ 4,900,000
------------
ALASKA -- 0.4%
Valdez Term Revenue, Arco,
Series 94A.................... VMIG1/A2 A1/A 3.65% 10/24/97 2,400,000 2,400,000
------------
ARIZONA -- 2.8%
Apache County Industrial
Development, Tucson Electric
Power (LOC -- Chase Manhattan
Bank) (final maturity
6/15/20)*..................... VMIG1/A2 A1/A+ 3.35% 09/03/97 7,800,000 7,800,000
Apache County Industrial
Development, Tuscon Electric
Power,Series 83-A (LOC --
Barclays Bank)(final maturity
12/15/18)*.................... VMIG1/AA A1+/AA 3.35% 09/03/97 10,500,000 10,500,000
------------
18,300,000
------------
ARKANSAS -- 1.7%
Arkansas State Development
Authority (final maturity
1/1/19)*...................... NR/NR A1+/AAA 3.95% 09/03/97 10,860,000 10,860,000
------------
CALIFORNIA -- 5.7%
California Statewide Community
Development, Series A2 (final
maturity 5/15/25)*............ NR/NR A1+/AAA 3.05% 09/03/97 15,800,000 15,800,000
California Health Facilities
Financing Authority, Series B
(LOC -- Morgan Guaranty Trust)
(final maturity 3/1/20)*...... VMIG1/Aa1 A1+/AAA 3.40% 09/02/97 5,400,000 5,400,000
Los Angeles County Public Works,
Series A (MBIA insured)....... AAA/NR AAA/NR 4.50% 09/01/97 4,600,000 4,600,000
Newport Beach, Hoag Memorial
Presbyterian Hospital, (final
maturity 10/1/22)*............ VMIG1/A1 A1+/AA 3.40% 09/02/97 7,100,000 7,100,000
Redlands Certificates of
Participation (FGIC insured)
(final maturity 9/1/17)*...... VMIG1/AAA A1+/AAA 3.05% 09/03/97 105,000 105,000
Rocklin Unified School District
(FGIC insured)................ NR/NR SP1+/NR 4.45% 09/04/97 3,700,000 3,700,152
------------
36,705,152
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 145
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
COLORADO -- 3.4%
Colorado Health Facilities
Authority, Sisters of Charity
Health Care System (LOC --
Toronto Dominion) (final
maturity 5/15/25)*............ VMIG1/Aa2 A1+/AA 3.35% 09/04/97 $ 1,700,000 $ 1,700,000
Colorado State Tax & Revenue
Anticipation Notes, Series A.. NR/NR SP1+/NR 4.50% 06/26/98 20,000,000 20,102,147
------------
21,802,147
------------
DELAWARE -- 0.6%
Delaware Economic Development
(final maturity 12/1/15)*..... VMIG1/Aaa A1+/AAA 3.40% 09/03/97 4,000,000 4,000,000
------------
DISTRICT OF COLUMBIA -- 5.0%
District of Columbia, Series A2
(LOC -- Canadian Imperial
Bank) (final maturity
10/1/07)*..................... VMIG1/Aa3 A1+/AA- 3.80% 09/02/97 13,300,000 13,300,000
District of Columbia, Series A3
(LOC -- Societe Generale)
(final maturity 10/1/07)*..... VMIG1/Aa3 A1+/AA+ 3.80% 09/02/97 11,000,000 11,000,000
District of Columbia, Series A5
(LOC -- Bank of Nova Scotia)
(final maturity 10/1/07)*..... VMIG1/Aa3 A1+/AA- 3.80% 09/02/97 7,800,000 7,800,000
------------
32,100,000
------------
FLORIDA -- 10.8%
Florida Board of Education
(final maturity 6/1/23)*...... NR/Aa A1+/AA 3.70% 12/01/97 9,900,000 9,900,000
Jacksonville Hospital, Baptist
Medical Center (LOC -- First
Union National Bank) (final
maturity 6/1/09)*............. VMIG1/NR A1/A+ 3.35% 09/04/97 7,000,000 7,000,000
Jacksonville Electric
Authority..................... P1/NR A1+/NR 3.60% 10/16/97 5,000,000 5,000,000
Jacksonville Pollution Control,
Florida Power & Light......... VMIG1/A2 A1/A 3.80% 10/23/97 3,000,000 3,000,000
Jacksonville Pollution Control,
Florida Power & Light......... VMIG1/A2 A1/A 3.70% 10/28/97 4,800,000 4,800,000
Lakeland Electric & Water
Revenue (FGIC insured)........ AAA/NR AAA/NR 5.25% 10/01/97 5,140,000 5,146,321
Lucie County, Florida Power &
Light......................... VMIG1/Aa3 A1+/AA 3.80% 10/22/97 9,850,000 9,850,000
Miami Health Facilities, Cedars
Medical Center, Series A
(final maturity 10/1/17)*..... NR/NR NR/NR 8.38% 10/01/97 1,000,000 1,005,690
Pasco County School Board (AMBAC
insured) (final maturity
8/1/26)*...................... VMIG1/AAA A1+/AAA 3.30% 09/04/97 7,000,000 7,000,000
Pinellas County Multi-Family
Housing, Foxbridge Apartments,
Series A (final maturity
6/15/25)*..................... NR/NR A1+/AAA 3.35% 09/03/97 5,000,000 5,000,000
Sarasota County, Hospital
District (Sarasota Hospital)
(LOC -- Suntrust bank)........ P1/Aa3 A1-/AA- 3.80% 11/18/97 5,000,000 5,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 146
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA -- (CONTINUED)
Sunshine State (LOC -- National
Westminster-Morgan Guaranty
Trust)........................ VMIG1/Aa2 NR/NR 3.60% 10/16/97 $ 7,500,000 $ 7,500,000
------------
70,202,011
------------
GEORGIA -- 2.4%
Burke County Development
Authority Pollution Control,
Oglethorpe Power Corp., Series
A (FGIC insured) (final
maturity 1/1/19)*............. VMIG1/AAA A1+/AAA 3.25% 09/03/97 3,000,000 3,000,000
Georgia Municipal Gas Authority
(LOC -- Morgan Guaranty Trust)
(final maturity 11/1/06)*..... NR/NR A1+/AA 3.30% 09/03/97 7,800,000 7,800,000
Roswell Housing Authority (final
maturity 8/1/30)*............. NR/NR A1+/AAA 3.35% 09/03/97 5,000,000 5,000,000
------------
15,800,000
------------
IDAHO -- 0.9%
Idaho State Tax Anticipation
Notes......................... MIG1/NR SP1+/NR 4.63% 06/30/98 6,000,000 6,035,593
------------
ILLINOIS -- 9.2%
Chicago Tender Notes (LOC --
Morgan Guaranty Trust) (final
maturity 1/31/99)**........... MIG1/VMIG1 A1+/Spl+ 3.65% 02/05/98 15,000,000 15,000,000
Franklin Park (final maturity
7/1/22)* (AMBAC insured)...... NR/NR A1+/AAA 3.40% 09/04/97 7,055,000 7,055,000
Illinois Health Facilities,
Elmhurst Memorial Hospital,
Series B (LOC -- Rabobank)
(final maturity 1/1/20)*...... VMIG1/A1 NR/NR 3.70% 09/02/97 15,285,000 15,285,000
Illinois Health Facilities,
Resurrection Health Care
(final maturity 5/1/11)*...... VMIG1/A2 NR/NR 3.60% 09/02/97 17,000,000 17,000,000
Illinois Health Facilities,
Franciscan Sisters Health
(final maturity 1/1/18)*...... VMIG1/A2 NR/NR 3.70% 09/02/97 4,950,000 4,950,000
------------
59,290,000
------------
INDIANA -- 1.2%
Jasper County Pollution Control
Revenue....................... VMIG1/A2 A1/A 3.80% 10/15/97 8,000,000 8,000,000
------------
IOWA -- 0.7%
Iowa Higher Education Loan
Authority, Private College
(MBIA insured) (final maturity
12/1/15)*..................... VMIG1/Aaa A1+/AAA 3.35% 09/03/97 4,700,000 4,700,000
------------
KANSAS -- 0.4%
Wamego Pollution Control
(LOC -- Credit Suisse-First
Boston) (final maturity
3/1/26)*...................... P1/Aa3 A1+/AA 3.35% 09/03/97 2,600,000 2,600,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 147
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
KENTUCKY -- 2.4%
Kentucky Asset/Liability Tax &
Revenue Anticipation Notes,
Series A...................... MIG1/NR SP1+/NR 4.50% 06/25/98 $10,000,000 $ 10,050,914
Kentucky Economic Development,
Sisters of Charity (final
maturity 11/1/20)*............ VMIG1/A1 A1/A+ 3.65% 09/02/97 5,600,000 5,600,000
------------
15,650,914
------------
LOUISIANA -- 3.3%
Ascension Parish, Borden Inc.
Project (LOC -- Credit Suisse)
(final maturity 12/1/09)*..... VMIG1/Aa2 A1+/AA 3.30% 09/03/97 5,500,000 5,500,000
Louisiana State General
Obligation Bonds, Tax Exempt
Eagle Trust, Series 1994
(AMBAC insured) (final
maturity 5/1/09)*............. NR/NR A1/AA 3.46% 09/04/97 11,600,000 11,600,000
Plaquemines Port Harbor & Term
District, Chevron Pipe Line
Company (final maturity
9/1/08)*...................... P1/Aa3 AA/NR 4.05% 03/01/98 4,000,000 4,000,000
------------
21,100,000
------------
MARYLAND -- 0.3%
Baltimore Industrial Development
(LOC -- Wachovia Bank) (final
maturity 12/1/16)*............ P1/Aa2 NR/NR 3.40% 09/04/97 1,715,000 1,715,000
------------
MASSACHUSETTS -- 0.5%
Massachusetts Health and
Education Authority, Capital
Assets, Series D (MBIA
insured) (final maturity
1/1/35)*...................... VMIG1/AAA A1+/AAA 3.65% 09/02/97 3,000,000 3,000,000
------------
MICHIGAN -- 2.1%
Farmington Hills Hospital
Finance Authority, Botsford
General Hospital, Series B
(MBIA insured) (final maturity
2/15/16)*..................... VMIG1/Aaa A1/AAA 3.65% 09/02/97 3,800,000 3,800,000
Michigan Municipal Bond
Authority, Series 97-B........ NR/NR NR/SP1+ 4.50% 07/02/98 10,000,000 10,056,136
------------
13,856,136
------------
MINNESOTA -- 1.3%
Cohasset Revenue, Minnesota
Power & Light Co. (LOC -- ABN
AMRO Bank N.V.) (final
maturity 6/1/13)*............. NR/NR A1+/AA+ 3.70% 09/01/97 1,000,000 1,000,000
Duluth Tax Increment Revenue,
Lake Superior Paper (LOC --
Wachovia Bank) (final maturity
9/1/10)*...................... MIG1/Aa2 A1+/AA+ 3.35% 09/04/97 4,100,000 4,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 148
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
MINNESOTA -- (CONTINUED)
St. Cloud Health Care Facilities
(final maturity 7/1/27)*
(LOC -- Rabobank Nederland)... P1/Aaa A1+/AAA 3.40% 09/04/97 $ 3,000,000 $ 3,000,000
------------
8,100,000
------------
MISSOURI -- 2.4%
Columbia Water & Electric,
Series B (LOC -- Toronto
Dominion Bank) (final maturity
12/1/15)*..................... VMIG1/Aa2 A1+/AA 3.30% 09/03/97 1,400,000 1,400,000
Missouri Health & Education, The
Washington University Project,
Series 96A (final maturity
9/1/30)*...................... VMIG1/Aa1 A1+/AA 3.75% 09/02/97 2,300,000 2,300,000
Missouri State Health &
Educational Authority, Series
B (MBIA insured) (final
maturity 6/1/22)*............. NR/AAA A1+/AAA 3.35% 09/03/97 2,000,000 2,000,000
Missouri State Infrastructure
Facilities, Midtown
Redevelopment Project
(LOC -- Dai-Ichi Kangyo, Los
Angeles) (final maturity
12/1/18)*..................... VMIG1/A1 NR/NR 3.60% 09/02/97 10,000,000 10,000,000
------------
15,700,000
------------
NEBRASKA -- 0.5%
Nebraska Educational Facilities
(FGIC insured) (final maturity
12/1/00)*..................... VMIG1/AAA A1/AAA 3.30% 09/03/97 3,435,000 3,435,000
------------
NEW MEXICO -- 1.4%
Albuquerque Gross Receipts,
Lodgers Tax Revenue (LOC --
Canadian Imperial Bank) (final
maturity 7/1/22)*............. Aa3/VMIG1 AA/A1+ 3.30% 09/03/97 1,200,000 1,200,000
New Mexico State Highway
Commission (FSA insured)
(final maturity 6/15/11)*..... VMIG1/Aaa A1+/AAA 3.30% 09/03/97 8,000,000 8,000,000
------------
9,200,000
------------
NEW YORK -- 4.6%
New York City Water & Sewer
Systems (final maturity
6/15/23)*..................... NR/NR A1+/AAA 3.45% 09/03/97 10,000,000 10,000,000
New York State Transportation
Authority (final maturity
4/1/10)*...................... VMIG1/AAA NR/NR 3.40% 09/03/97 9,900,000 9,900,000
New York State Energy Research &
Development, Pollution
Control, New York State
Electric & Gas Corp.
(LOC -- Morgan Guaranty)
(final maturity 6/1/29)*...... VMIG1/Aa1 A1+/AAA 3.65% 09/02/97 10,000,000 10,000,000
------------
29,900,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 149
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA -- 7.8%
Charlotte Airport Revenue,
Series 93A (MBIA insured)
(final maturity 7/1/16)*...... VMIG1/Aaa A1+/AAA 3.25% 01/01/98 $10,280,000 $ 10,280,000
Lenoir County Hospital Revenue,
Lenoir Memorial Hospital
(LOC -- Wachovia Bank) (final
maturity 10/1/12)*............ VMIG1/AA2 NR/NR 3.40% 09/04/97 3,400,000 3,400,000
North Carolina Easton Municipal
Power (LOC -- Canadian
Imperial Bank of Commerce).... P1/Aa3 A1+/AA 3.55% 10/30/97 10,000,000 10,000,000
North Carolina Easton Municipal
Power (LOC -- Canadian
Imperial Bank of Commerce).... P1/Aa3 A1+/AA 3.70% 11/13/97 6,200,000 6,200,000
North Carolina Medical Care
Commission, Pooled Equipment
Financing Project, (MBIA
insured) (final maturity
12/1/25)*..................... VMIG1/AAA A2/AAA 3.55% 12/01/97 1,300,000 1,300,000
North Carolina Retirement
Community (LOC -- LaSalle
National Bank) (final maturity
11/15/09)*.................... NR/NR A1+/AA+ 3.38% 09/02/97 10,000,000 10,000,000
Wake County Pollution Control,
Carolina Power & Light Co.
Project, Series B (LOC --
Sumitomo Bank) (final maturity
9/1/15)*...................... VMIG1/A1+ NR/NR 3.45% 09/03/97 7,300,000 7,300,000
Wake County Pollution Control,
Carolina Power & Light Co.
Project, Series C (LOC --
Sumitomo Bank) (final maturity
10/1/15)*..................... P1/NR A1+/NR 3.45% 09/03/97 2,300,000 2,300,000
------------
50,780,000
------------
NORTH DAKOTA -- 0.5%
Grand Forks Hospital Facilities,
United Hospital (LOC --
LaSalle National Bank) (final
maturity 12/1/16)*............ VMIG1/A1 NR/NR 3.65% 09/02/97 3,340,000 3,340,000
------------
OHIO -- 0.4%
Hamilton County Hospital
Facilities Bethesda Hospital,
Inc. (LOC -- Rabobank
Nederland) (final maturity
2/15/24)*..................... VMIG1/Aaa A1+/AAA 3.20% 09/04/97 2,600,000 2,600,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 150
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA -- 7.1%
Allegheny County Industrial
Development, Duquesne Light
Co., Series A (LOC -- Canadian
Imperial Bank of Commerce)
(final maturity 9/1/11)*...... NR/P1 AA-/A1+ 3.65% 10/30/97 $ 8,225,000 $ 8,225,000
Allegheny County Industrial
Development, Duquesne Light
Co., Series A (LOC -- Canadian
Imperial Bank of Commerce)
(final maturity 9/1/11)*...... NR/P1 AA-/A1+ 3.65% 10/30/97 3,700,000 3,700,000
Delaware Valley Finance
Authority (LOC -- Credit
Suisse) (final maturity
12/1/19)*..................... VMIG1/Aa3 A1+/AA 3.25% 09/02/97 3,000,000 3,000,000
Emmaus General Authority, Series
B (final maturity 3/1/24)*.... NR/NR NR/NR 3.35% 09/03/97 2,200,000 2,200,000
Quakertown General Authority,
Series A (LOC -- PNC Bank)
(final maturity 7/1/26)*...... VMIG1/A1 NR/NR 3.45% 09/02/97 18,600,000 18,600,000
Quakertown Hospital Authority,
HPS Group Pooled Financing
(LOC -- PNC Bank) (final
maturity 7/1/05)*............. VMIG1/A1 NR/NR 3.45% 09/02/97 10,000,000 10,000,000
------------
45,725,000
------------
RHODE ISLAND -- 0.7%
Rhode Island Housing, Series
22-A (FGIC insured) (final
maturity 4/1/27)*............. VMIG1/AA2 A1+/AA+ 3.65% 12/02/97 4,615,000 4,615,000
------------
SOUTH CAROLINA -- 3.1%
South Carolina Public Service
Authority..................... P1/Aa A1/AA- 3.80% 10/22/97 10,000,000 10,000,000
South Carolina Public Service
Authority..................... P1/Aa A1/AA- 3.65% 11/20/97 10,000,000 10,000,000
------------
20,000,000
------------
TENNESSEE -- 6.0%
Bristol Health & Education
Facilities, Series 95A (final
maturity 3/1/14)* (FGIC
insured)...................... NR/NR A1/AAA 3.45% 09/03/97 8,500,000 8,500,000
Johnson City (final maturity
5/1/21)* (FGIC insured)....... NR/NR A1+/AAA 3.50% 09/03/97 9,775,000 9,775,000
Metropolitan Government
Nashville & Davidson County
Health & Education Facilities,
Adventist/Sunbelt, Series A
(LOC -- Suntrust Bank) (final
maturity 11/15/26)*........... VMIG1/Aa3 A1+/AA- 3.38% 09/04/97 9,500,000 9,500,000
Shelby County General Obligation
(FSA insured) (final maturity
11/1/21)*..................... NR/NR A1+/AAA 3.40% 09/04/97 11,200,000 11,200,000
------------
38,975,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 151
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
TEXAS -- 7.6%
Bexar County Housing Authority
(final maturity 9/15/26)*..... NR/NR AAA/A1+ 3.35% 09/03/97 $ 3,275,000 $ 3,275,000
Brownsville Texas Utility System
(LOC -- Toronto Dominion)..... P1/Aa2 A1+/AA 3.80% 10/29/97 8,500,000 8,500,000
Grand Prairie, Housing Lincoln
Property Co. (final maturity
6/1/10)*...................... NR/NR A1+/AAA 3.40% 09/03/97 6,700,000 6,700,000
Gulf Coast Waste Disposal,
Pollution Control, Exxon
Project (final maturity
6/1/20)*...................... VMIG1/Aaa A1+/AAA 3.70% 09/03/97 2,100,000 2,100,000
Harris County Health Facilities,
Memorial Hospital (final
maturity 6/1/24)*............. VMIG1/Aaa A1+/AAA 3.25% 09/03/97 3,500,000 3,500,000
North Texas Water District
(AMBAC insured) (final
maturity 6/1/02)*............. NR/AAA NR/AAA 7.65% 06/01/98 2,280,000 2,357,694
Texas Department of Housing..... NR/NR A1+/NR 3.50% 09/17/97 8,450,000 8,450,000
Texas Department of Housing..... NR/NR A1+/NR 3.60% 09/17/97 1,060,000 1,060,000
Texas State Tax & Revenue
Anticipation Notes............ MIG1/NR SP1+/NR 4.75% 08/31/98 12,000,000 12,104,115
University of Texas............. P1/NR A1+/NR 3.65% 11/18/97 1,440,000 1,440,000
------------
49,486,809
------------
UTAH -- 3.6%
Intermountain Power Agency,
Power Supply Revenue
(LOC -- Swiss Bank) (final
maturity 7/1/14)*............. VMIG1/Aa1 A1+/AA+ 3.50% 09/15/97 5,500,000 5,500,000
Intermountain Power Agency,
Power Supply Revenue (final
maturity 7/1/03)*............. VMIG1/AAA NR/NR 3.45% 09/03/97 9,900,000 9,900,000
Utah State Housing Finance
Agency, Single Family, Series
4 (final maturity 1/1/28)*.... VMIG1/Aa1 NR/NR 3.45% 09/03/97 8,000,000 8,000,000
------------
23,400,000
------------
VERMONT -- 0.7%
Vermont Education & Health
Building, Middlebury College
(final maturity 5/1/28)*...... NR/Aa A1+/AA 3.95% 09/03/97 4,700,000 4,700,000
------------
WISCONSIN -- 1.0%
Carlton Pollution Control
Revenue, Wisconsin Power and
Light Co. (final maturity
9/01/05)*..................... VMIG1/Aa2 A1+/AA 3.60% 09/02/97 1,400,000 1,400,000
Wisconsin Transportation
(LOC -- Bayerische
Landesbank)................... P1/Aaa A1+/AAA 3.70% 11/05/97 5,105,000 5,105,000
------------
6,505,000
------------
WYOMING -- 0.9%
Sweetwater County Pollution
Control, Pacificorp 84
(LOC -- Deutsche Bank) (final
maturity 12/1/14)*............ P1/Aa1 A1+/AAA 3.60% 12/01/2014 2,500,000 2,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
17
<PAGE> 152
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
WYOMING -- (CONTINUED)
Uinta County Pollution Control,
Chevron Inc. Project (final
maturity 12/1/22)*............ P1/Aa2 NR/NR 3.80% 12/01/22 $ 3,400,000 $ 3,400,000
------------
5,900,000
------------
TOTAL INVESTMENTS (AMORTIZED COST
$675,378,762)(A) -- 104.2%...... 675,378,762
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (4.2%)................ (26,934,255)
------------
NET ASSETS -- 100.0%............. $648,444,507
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $648,444,507.
(a) Cost for federal income tax and financial reporting purposes is
substantially the same.
AMBAC -- AMBAC Indemnity Corporation.
FGIC -- Financial Guaranty Insurance Company.
FSA -- Financial Security Assurance.
LOC -- Letter of Credit.
MBIA -- Municipal Bond Insurance Association.
NR -- No rating assigned by Moody's or S&P.
*Variable rate security. Maturity date reflects the next rate change date.
**Security includes put feature. Maturity date reflects the next put date.
+The ratings provided consist of short-term and long-term ratings.
See Notes to Financial Statements.
18
<PAGE> 153
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 99.9%
CALIFORNIA -- 99.1%
California Counties Industrial
Development Authority (LOC --
California State Teachers
Retirement) (final maturity
9/1/08)*.......................... NR/NR A1+/AA+ 3.25% 09/01/97 $ 1,175,000 $ 1,175,000
California Department of Water..... P1/Aa A1+/AA 3.35% 09/11/97 2,039,000 2,039,000
California General Obligation...... P1/A A/A+ 3.65% 09/19/97 5,000,000 5,000,000
California General Obligation...... P1/A A/A+ 3.55% 10/30/97 10,750,000 10,750,000
California General Obligation...... P1/A A/A+ 3.60% 10/09/97 14,000,000 14,000,000
California General Obligation...... P1/A A/A+ 3.55% 10/09/97 2,500,000 2,500,000
California General Obligation
(final maturity 4/1/04)*.......... NR/NR A1+/AAA 3.70% 09/15/97 15,100,000 15,100,000
California General Obligation,
Class A (final maturity 2/1/06)*.. A1+/AA NR/NR 3.36% 09/04/97 10,000,000 10,000,000
California Health Facilities
Authority, Sutter Health, Series C
(FSA insured) (final maturity
7/1/22)*.......................... AAA/NR A1+/AAA 3.40% 09/02/97 1,800,000 1,800,000
California Health Facilities
Financing Authority, Children's
Hospital (MBIA insured) (final
maturity 11/1/21)*................ VMIG1/AAA A1+/AAA 3.00% 09/03/97 1,900,000 1,900,000
California Housing Agency, Multi-
Family Housing (final maturity
7/15/13)*......................... NR/NR A1+/AAA 3.00% 09/03/97 2,600,000 2,600,000
California Local Government Agency,
Certificates of Participation
(LOC -- Fuji Bank, Ltd.) (final
maturity 8/1/16)*................. VMIG1/A1 NR/NR 3.30% 09/03/97 3,200,000 3,200,000
California Pollution Control
Financing Authority, Atlantic
Richfield Project, Series A (AMT)
(final maturity 12/1/24)*......... VMIG1/A2 A1/A 3.55% 09/02/97 8,800,000 8,800,000
California Pollution Control
Financing Authority, Chevron USA,
Inc. Project, Callable 10/9/97@100
(final maturity 11/15/01)*........ AA2/NR AA/NR 3.90% 11/15/97 2,405,000 2,408,925
California Pollution Control
Financing Authority, Colmac Energy
Project, Series A (AMT)
(LOC -- Swiss Bank) (final
maturity 12/1/16)*................ NR/NR A1+/AA+ 3.00% 09/03/97 2,300,000 2,300,000
California Pollution Control
Financing Authority, Delano Power
Project (AMT) (LOC -- Algemene
Bank Nederland) (final maturity
8/1/19)*.......................... P1/Aa1 NR/NR 3.55% 09/02/97 5,100,000 5,100,000
California Pollution Control
Financing Authority, Delano
Project (final maturity 8/1/19)*.. P1/Aa1 NR/NR 3.55% 09/02/97 3,400,000 3,400,000
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 154
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Pollution Control
Financing Authority, Dow Chemical
Project........................... P1/NR A1/NR 3.55% 10/09/97 $ 2,300,000 $ 2,300,000
California Pollution Control
Financing Authority, Equity
Stanislaus Project (LOC -- Swiss
Bank) (final maturity 12/1/17)*... VMIG1/AA1 A1+/AA+ 3.45% 09/02/97 1,600,000 1,600,000
California Pollution Control
Financing Authority, Honey Lake
Power Company Project (LOC --
Banque Nationale, Paris) (final
maturity 9/1/18)*................. P1/AA3 NR/NR 3.55% 09/02/97 5,300,000 5,300,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Banque Nationale,
Paris) (final maturity
11/1/26)*......................... NR/NR A1+/AA+ 3.50% 09/02/97 9,200,000 9,200,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Rabobank
Nederland) (final maturity
12/1/16)*......................... NR/NR A1+/AAA 3.10% 09/03/97 11,500,000 11,500,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Swiss Bank
Corporation) (final maturity
12/1/16)*......................... NR/NR A1+/AAA 3.05% 09/03/97 32,000,000 32,000,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Toronto Dominion
Bank) (final maturity 12/1/18)*... NR/NR A1+/AAA 3.50% 09/02/97 2,800,000 2,800,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (final maturity
2/1/16)*.......................... P1/A1 A1/A 3.50% 09/02/97 23,100,000 23,100,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric, Series D,
(LOC -- UBS)...................... A1+/AA NR/NR 3.65% 10/21/97 15,000,000 15,000,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric, Series D,
(LOC -- UBS)...................... A1+/AA NR/NR 3.70% 10/23/97 5,000,000 5,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Martinez Project, Series A
(AMT) (final maturity 10/1/24)*... VMIG1/Aa1 NR/NR 3.45% 09/02/97 1,000,000 1,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Martinez Project, Series B
(AMT) (final maturity 10/1/31)*... VMIG1/AA1 A1+/AAA 3.05% 09/03/97 6,000,000 6,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Project (final maturity
10/1/11)*......................... VMIG1/AA1 A1+/AAA 3.40% 09/02/97 1,000,000 1,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
20
<PAGE> 155
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Pollution Control
Financing Authority, Solid Waste
Disposal Revenue Bond, Taorimina
Industries, Inc. (AMT)
(LOC -- Sanwa Bank, Los Angeles,
Sanwa Bank, Ltd.) (final maturity
8/1/14)*.......................... VMIG1/AA3 NR/NR 3.15% 09/03/97 $ 5,500,000 $ 5,500,000
California Pollution Control
Financing Authority, Solid Waste
Disposal Revenue Bond, Taormina
Industries, Series B (AMT)
(LOC -- Sanwa Bank, Los Angeles,
Sanwa Bank, Ltd.) (final maturity
8/1/14)*.......................... VMIG1/Aa3 NR/NR 3.15% 09/03/97 2,260,000 2,260,000
California Pollution Control
Financing Authority, Southern
California Edison................. F1/A1 A1/A+ 3.50% 11/19/97 14,000,000 14,000,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85C..... P1/A1 A1/A+ 3.60% 10/10/97 3,300,000 3,300,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85C..... P1/A1 A1/A+ 3.55% 10/16/97 2,000,000 2,000,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85D..... P1/A1 A1/A+ 3.50% 11/20/97 6,200,000 6,200,000
California School Cash Reserve
Program, Series A................. MIG1/NR SP1+/NR 4.75% 07/02/98 30,000,000 30,216,381
California State................... P1/P2 A1/A+ 3.60% 10/23/97 2,700,000 2,700,000
California State Department of
Water (final maturity 12/1/29)*... NR/AA A+/AA 3.31% 09/04/97 8,300,000 8,300,000
California State Municipal Receipts
(AMBAC insured) (final maturity
6/1/21)*.......................... A1+/AAA A1+/AAA 3.40% 09/03/97 15,950,000 15,950,000
California State Municipal Receipts
(FGIC insured) (final maturity
8/1/19)*.......................... A1+/AAA A1+/AAA 3.30% 09/04/97 7,175,000 7,175,000
California State Municipal Receipts
(FGIC insured) (final maturity
9/1/21)*.......................... A1+/AAA A1+/AAA 3.30% 09/03/97 3,875,000 3,875,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-1
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 2,000,000 2,000,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-2
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 9,200,000 9,200,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-7
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 2,800,000 2,800,000
California Statewide Community
Development Authority, Calsonic
Project (LOC -- Union Bank of
California) (final maturity
8/1/08)*.......................... F1+/AA- NR/NR 3.40% 09/03/97 7,000,000 7,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
21
<PAGE> 156
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Statewide Community
Development Authority,
Certificates of Participation
(LOC -- Dresdner Bank) (final
maturity 6/1/26)*................. VMIG1/AA1 NR/NR 3.40% 09/02/97 $12,600,000 $ 12,600,000
California Statewide Community
Development Authority, Contech
Construction Project (LOC -- Bank
of Tokyo) (final maturity
5/1/09)*.......................... NR/NR A1+/AA+ 3.25% 09/03/97 1,440,000 1,440,000
California Statewide Community
Development Authority, Chevron
USA, Inc. Project (final maturity
12/15/24)*........................ P1/Aa2 NR/NR 3.50% 09/02/97 3,200,000 3,200,000
Chula Vista Industrial Development,
San Diego Gas & Electric Company,
Series B (AMT) (final maturity
12/1/27)*......................... VMIG1/A1 A1/A+ 3.15% 09/03/97 11,000,000 11,000,000
Chula Vista Multi-Family Housing,
Terra Nova Project, Series A
(LOC -- Industrial Bank of Japan)
(final maturity 3/1/05)*.......... NR/NR A1/A 3.20% 09/03/97 5,000,000 5,000,000
Chula Vista, San Diego Gas &
Electric, Series 92C (AMT)........ P1/A1 A1/A+ 3.75% 10/23/97 3,000,000 3,000,000
Contra Costa County Multi-Family
Housing, Park Regency, Series A
(final maturity 8/1/32)*.......... NR/NR A1+/A 3.20% 09/03/97 8,000,000 8,000,000
Contra Costa County Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 07/01/98 10,000,000 10,053,544
Foothill Eastern Toll Road, Series
B (LOC -- Morgan Guaranty Trust)
(final maturity 1/2/35)*.......... NR/NR A1+/AAA 3.10% 09/04/97 13,500,000 13,500,000
Foothill Eastern Toll Road, Series
D (LOC -- Industrial Bank of
Japan) (final maturity 1/2/35)*... A1/A F1+/AA 3.00% 09/04/97 6,300,000 6,300,000
Foothill Eastern Toll Road, Series
E (LOC -- Banque Nationale, Paris)
(final maturity 1/2/35)*.......... NR/NR A1+/A+ 3.00% 09/04/97 5,000,000 5,000,000
Fremont Certificates of
Participation,Building & Equipment
Financing Project (LOC -- Sumitomo
Bank, Ltd.) (final maturity
7/1/15)*.......................... NR/NR A1/A 3.20% 09/04/97 4,125,000 4,125,000
Fremont Certificates of
Participation (LOC -- Sumitomo
Bank, Ltd.) (final maturity
8/1/22)*.......................... NR/NR A1/A 3.20% 09/04/97 3,100,000 3,100,000
Fremont Multi-Family Housing
Authority, Mission Wells Project
(LOC -- Industrial Bank of Japan)
(final maturity 9/1/07)*.......... NR/NR A1/A 3.20% 09/04/97 6,700,000 6,700,000
Fremont School District, Alameda
County (final maturity 8/1/20)*... NR/NR A1+/AAA 3.35% 09/04/97 6,150,000 6,150,000
Grand Terrace Community
Redevelopment Agency, Mt. Vernon
Villas (LOC -- Industrial Bank of
Japan) (final maturity
12/1/11)*......................... NR/NR A1/A 3.40% 09/03/97 1,650,000 1,650,000
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 157
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Huntington Beach Multi-Family
Housing, Huntington Breakers,
Series A (LOC -- Sumitomo Bank,
Ltd.) (final maturity 7/1/14)*.... VMIG1/A1 NR/NR 3.20% 09/03/97 $10,300,000 $ 10,300,000
Indio Multi-Family Housing, Western
Federal Savings Project
(LOC -- Wells Fargo & Co.) (final
maturity 6/1/05)*................. NR/NR A1/A+ 3.15% 09/04/97 2,950,000 2,950,000
Irvine Improvement Board Act 1915,
District 94-15 (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
9/2/20)*.......................... VMIG1/A1 A1/A 3.45% 09/02/97 4,733,000 4,733,000
Irvine Improvement Board Act 1915,
District 95-12, Series A (LOC --
Kredietbank N.V.) (final maturity
9/2/21)*.......................... VMIG1/AA2 A1+/AA- 3.40% 09/02/97 3,350,000 3,350,000
Irvine Ranch Water District
Certificates of Participation,
Capital Improvement Project
(LOC -- Toronto Dominion) (final
maturity 8/1/16)*................. VMIG1/AA2 NR/NR 3.40% 09/02/97 2,300,000 2,300,000
Irvine Ranch Water District
(LOC -- Landesbank Hessen) (final
maturity 10/1/10)*................ NR/NR A1+/AAA 3.40% 09/02/97 1,200,000 1,200,000
Long Beach Health Services,
Memorial Health Service (final
maturity 10/1/16)*................ VMIG1/A1 A1+/AA- 3.00% 09/03/97 9,200,000 9,200,000
Los Angeles Community Redevelopment
Agency, Academy Village Apartments
(LOC -- Swiss Bank) (final
maturity 10/1/19)*................ VMIG1/AA1 NR/NR 3.15% 09/02/97 15,000,000 15,000,000
Los Angeles Community Redevelopment
Agency, Grand Promenade Project
(LOC -- Tokai Bank, Ltd.) (final
maturity 12/1/10)*................ NR/NR A1+/AAA 3.05% 09/02/97 14,900,000 14,900,000
Los Angeles County (AMT)
(LOC -- National Westminster Bank,
PLC).............................. P1/A1+ NR/NR 3.80% 09/11/97 15,000,000 15,000,000
Los Angeles County (AMT)
(LOC -- National Westminster Bank,
PLC).............................. P1/A1+ NR/NR 3.70% 09/11/97 6,000,000 6,000,000
Los Angeles County, Capital Asset
Lease Corp. (LOC -- Morgan
Guaranty Trust)................... P1/A1+ NR/NR 3.75% 10/22/97 10,000,000 10,000,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB1 (FSA insured) (final maturity
7/1/25)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 3,500,000 3,500,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB2(FSA insured) (final maturity
7/1/21)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 23,000,000 23,000,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB3(FSA insured) (final maturity
7/1/16)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 5,400,000 5,400,000
</TABLE>
- ---------------
See Notes to Financial Statements.
23
<PAGE> 158
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles County Metropolitan
Transportation Authority, Series
SG-54 (AMBAC insured) (final
maturity 7/1/17)*................. NR/NR A1+/AAA 3.45% 09/03/97 $ 2,100,000 $ 2,100,000
Los Angeles County Multi-Family
Housing, Channel Gateway
Apartments (LOC -- Fuji Bank,
Ltd.) (final maturity 8/1/19)*.... VMIG1/A1 NR/NR 3.90% 09/04/97 6,700,000 6,700,000
Los Angeles County Multi-Family
Housing, Sandi Canyon Villas (AMT)
(LOC -- Industrial Bank of Japan)
(final maturity 11/1/09)*......... VMIG1/A2 NR/NR 3.45% 09/03/97 2,000,000 2,000,000
Los Angeles County Multi-Family
Housing, Studio Colony (LOC --
Industrial Bank of Japan) (final
maturity 5/16/07)*................ VMIG1/A2 NR/NR 3.20% 09/04/97 2,100,000 2,100,000
Los Angeles County Public Water
Financing Authority, Series A
(MBIA insured).................... AAA/NR AAA/NR 4.50% 09/01/97 5,000,000 5,000,000
Los Angeles County Sales Tax
Revenue, Series A (FGIC insured)
(final maturity 7/1/12)*.......... VMIG1/AAA A1/NR 09/03/97 1,400,000 1,400,000
Los Angeles County, Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 06/30/98 15,000,000 15,077,657
Los Angeles County Metropolitan
Transportation Authority (LOC --
National Westminster Bank, PLC)... P1/A1+ NR/NR 3.45% 09/25/97 6,000,000 6,000,000
Los Angeles County Wastewater
Project (LOC -- Morgan Guaranty
Trust)............................ P1/A1+ NR/NR 3.50% 09/05/97 15,000,000 15,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.75% 10/09/97 9,000,000 9,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.70% 10/09/97 10,000,000 10,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.90% 10/15/97 10,000,000 10,000,000
Los Angeles Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 06/30/98 15,000,000 15,071,559
Los Angeles Unified School
District, Tax & Revenue
Anticipation Notes, Series B...... MIG1/NR SP1+/NR 4.50% 09/30/97 8,500,000 8,505,597
Marin County CA Tax & Revenue
Anticipation Notes................ MIG1/NR NR/NR 4.50% 07/31/98 20,000,000 20,114,442
Modesto Irrigation District........ VMIG1/A A/NR 3.60% 10/15/97 3,000,000 3,000,000
Modesto Irrigation District,
Certificates of Participation..... VMIG1/A A1/NR 3.50% 10/20/97 5,000,000 5,000,000
Modesto Multi-Family Housing, Live
Oaks Apartments Project (final
maturity 9/1/24)*................. NR/NR A1+/AAA 3.05% 09/03/97 1,400,000 1,400,000
Monterey County Financing
Authority, Reclamation and
Distribution Project (LOC -- Dai-
Ichi Kangyo, Los Angeles) (final
maturity 9/1/36)*................. VMIG1/A1 NR/NR 3.25% 09/04/97 6,100,000 6,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
24
<PAGE> 159
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Monterey Peninsula Water Management
District, Wastewater Reclamation
Project (LOC -- Sumitomo Bank,
Ltd.) (final maturity 7/1/22)*.... VMIG1/A1 A1/A 3.20% 09/04/97 $16,300,000 $ 16,300,000
Newport Beach, Hoag Memorial
Hospital (final maturity
10/1/22)*......................... VMIG1/A1 A1+/AA 3.40% 09/02/97 20,090,000 20,090,000
Newport Beach, Hoag Memorial
Hospital, Series A (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 13,400,000 13,400,000
Newport Beach, Hoag Memorial
Hospital, Series B (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 1,600,000 1,600,000
Newport Beach, Hoag Memorial
Hospital, Series C (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 22,800,000 22,800,000
Oakland, Children's Hospital
Medical Center, Series B (LOC --
Banque Nationale, Paris) (final
maturity 7/1/99)*................. NR/NR A1/A+ 3.00% 09/03/97 3,100,000 3,100,000
Orange County, Pointe Niguel
Project, Series C (LOC -- First
Interstate Bancorp) (final
maturity 11/1/05)*................ VMIG1/AA3 NR/NR 3.35% 09/04/97 13,000,000 13,000,000
Orange County Housing Authority,
Costa Partner Development, Series
BB (LOC -- Chase/Chemical Bank)
(final maturity 12/1/09)*......... VMIG1/Aa2 NR/NR 3.05% 09/02/97 12,200,000 12,200,000
Orange County Sanitation,
Certificates of Participation,
Series C (FGIC Insured) (final
maturity 8/1/17)*................. VMIG1/AAA A1+/AAA 3.55% 09/02/97 20,650,000 20,650,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.50% 11/19/97 2,000,000 2,000,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.65% 11/06/97 4,000,000 4,000,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.65% 09/04/97 1,500,000 1,500,000
Otay Water District, Certificates
of Participation
(LOC -- Landesbank Hessen) (final
maturity 9/1/26)*................. VMIG1/AAA A1+/AAA 3.05% 09/03/97 2,200,000 2,200,000
Placer Unified High School District
Tax & Revenue Anticipation
Notes............................. MIG1/NR SP1+/NR 4.45% 09/04/97 3,700,000 3,700,152
Redlands Certificates of
Participation, Water Treatment
Facilities Project, (FGIC Insured)
(final maturity 9/1/17)*.......... VMIG1/AAA F1+/AAA 3.05% 09/03/97 3,515,000 3,515,000
Redlands Certificates of
Participation (FGIC Insured)
(final maturity 9/1/15)*.......... VMIG1/AAA A1+/AAA 3.05% 09/03/97 2,500,000 2,500,000
Riverside County Industrial
Development, Advanced Business
Forms, Inc. Project (AMT)
(LOC -- First National Bank)
(final maturity 4/1/14)*.......... VMIG1/AAA NR/NR 3.00% 09/04/97 1,500,000 1,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
25
<PAGE> 160
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Riverside County Industrial
Development, Cryogenic Project,
Issue B (AMT) (LOC -- Rabobank
Nederland) (final maturity
7/5/14)*.......................... VMIG1/AAA NR/NR 3.00% 09/04/97 $ 1,400,000 $ 1,400,000
Riverside County Industrial
Development, Riverfront/Crest
Steel (AMT) (LOC -- First National
Bank) (final maturity 4/1/09)*.... VMIG1/AAA NR/NR 3.00% 09/04/97 2,950,000 2,950,000
Riverside County Transportation
(LOC -- Union Bank of
Switzerland)...................... P1/A1 A1/A 3.55% 09/04/97 2,000,000 2,000,000
Riverside County Transportation
Sales Tax Revenue (LOC --
Industrial Bank of Japan)......... P1/A1 A1/A 3.75% 10/07/97 3,000,000 3,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.60% 10/17/97 5,000,000 5,000,000
Sacramento County Multi-Family
Housing, Series A (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
4/15/07)*......................... VMIG1/A1 A1/A+ 3.25% 09/04/97 15,400,000 15,400,000
Sacramento County Multi-Family
Housing, Series C (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
4/15/07)*......................... VMIG1/A1 A1/A+ 3.25% 09/04/97 1,600,000 1,600,000
Sacramento County Municipal Note
Utility District (LOC --
Bayerische Landesbank)............ P1/Aaa A1+/AAA 3.60% 09/27/97 5,700,000 5,700,000
Sacramento County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 09/30/97 42,000,000 42,023,082
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.50% 10/28/97 8,000,000 8,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.30% 09/12/97 2,000,000 2,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.70% 10/17/97 4,293,000 4,293,000
San Bernardino County Industrial
Development Authority, NRI Inc.
Project (LOC -- California State)
(final maturity 5/1/09)*.......... NR/NR A1+/AA+ 3.25% 09/03/97 1,575,000 1,575,000
San Bernardino County Multi-Family
Housing, Brookside Meadows, Series
A (LOC -- Tokai Bank, Chase
Manhattan) (final maturity
8/1/05)*.......................... VMIG1/AA2 NR/NR 3.10% 09/03/97 13,000,000 13,000,000
San Bernardino County Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 06/30/98 7,000,000 7,036,240
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.65% 10/28/97 5,200,000 5,200,000
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.40% 09/09/97 5,000,000 5,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
26
<PAGE> 161
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.70% 11/21/97 $ 2,000,000 $ 2,000,000
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric, Series A.......... P1/A1 A1/A+ 3.75% 11/13/97 1,500,000 1,500,000
San Diego County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.38% 09/30/97 24,100,000 24,111,147
San Diego County Water Authority... P1/NR A1/NR 3.40% 09/09/97 2,000,000 2,000,000
San Diego Housing Authority, Multi-
Family Housing, Nobel Ct.
Apartments, Series L (LOC --
Citibank, New York) (final
maturity 12/1/08)*................ VMIG1/AA2 NR/NR 3.05% 09/04/97 1,700,000 1,700,000
San Diego Housing Authority, Multi-
Family Housing, Nobel Ct.
Apartments, Series L (LOC -- Tokai
Bank, Ltd.) (final maturity
12/1/08)*......................... VMIG2/A2 NR/NR 3.05% 09/04/97 9,700,000 9,700,000
San Francisco City and County
Airport (LOC -- Bayerische
Landesbank)....................... P1/NR A1+/NR 3.65% 11/19/97 12,500,000 12,500,000
San Francisco City and County
Airport (LOC -- Bayerische
Landesbank)....................... P1/NR A1+/NR 3.65% 11/18/97 3,000,000 3,000,000
San Francisco City and County
Airport (FGIC Insured) (final
maturity 5/1/21)*................. A1+/AAA NR/NR 3.45% 09/04/97 5,345,000 5,345,000
San Francisco City and County
Airport (MBIA Insured) (final
maturity 5/1/26)*................. A1+/AAA NR/NR 3.40% 09/04/97 3,905,000 3,905,000
San Francisco City and County
Multi-Family Housing, Bayside
Village Project D, Series A
(LOC -- Industrial Bank of Japan)
(final maturity 12/1/05)*......... VMIG1/A2 NR/NR 3.45% 09/04/97 1,000,000 1,000,000
San Francisco City and County
Multi-Family Housing, Winterland
Project, Series 85-C (LOC --
Citibank, New York) (final
maturity 6/1/06)*................. NR/NR A1+/AA- 3.15% 09/02/97 1,500,000 1,500,000
San Francisco City and County Tax &
Revenue Anticipation Notes........ MIG1/NR SP1+/NR 4.50% 10/08/97 35,500,000 35,526,853
San Mateo County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 07/01/98 7,000,000 7,039,166
Simi Valley Multi-Family Housing,
Lincoln Wood Ranch (LOC --
Sumitomo Bank, Ltd.) (final
maturity 6/1/10)*................. NR/NR A1/A 3.35% 09/04/97 7,500,000 7,500,000
Southeast Recovery Facility, Series
B (AMT) (LOC -- Industrial Bank of
Japan Ltd.) (final maturity
12/1/18)*......................... VMIG1/A2 A1/A 3.20% 09/03/97 3,300,000 3,300,000
Southeast Recovery Facility, Series
A (LOC -- Industrial Bank of Japan
Ltd.) (final maturity 12/1/18)*... VMIG1/A2 A1/A 3.10% 09/03/97 22,000,000 22,000,000
Southern California Metropolitan
Water Authority................... P1/NR A1+/NR 3.60% 11/13/97 5,700,000 5,700,000
</TABLE>
- ---------------
See Notes to Financial Statements.
27
<PAGE> 162
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Southern California Metropolitan
Water Authority................... P1/NR A1+/NR 3.55% 11/19/97 $ 4,000,000 $ 4,000,000
Tahoe-Truckee Unified School
District, Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.45% 09/04/97 4,000,000 4,000,164
Tustin Improvement Board Act 1915,
Reassessment District 95-2-A
(LOC -- Kredietbank) (final
maturity 9/2/13)*................. VMIG1/AA2 A1+/AA- 3.40% 09/02/97 1,600,000 1,600,000
Vallejo Industrial Development
Authority, Meyer Cookware Project,
Series A (AMT) (LOC -- Bank of
Tokyo) (final maturity
12/1/23)*......................... NR/NR A1/A+ 3.40% 12/01/23 3,300,000 3,300,000
Washington Township Hospital,
Series A (LOC -- Industrial Bank
of Japan) (final maturity
1/1/16)*.......................... VMIG1/A2 NR/NR 3.20% 09/04/97 16,000,000 16,000,000
West Basin Water District,
Certificates of Participation,
Water Project (LOC -- Bayerische
Vereinsbank) (final maturity
8/1/27)*.......................... VMIG1/AA1 NR/NR 2.95% 09/03/97 3,000,000 3,000,000
--------------
1,152,029,909
--------------
PUERTO RICO -- 0.8%
Puerto Rico Public Buildings
Authority, Trust Receipts, Series
SGA16 (AMBAC Insured) (final
maturity 7/1/21)*................. NR/NR A1+/AAA 3.30% 09/03/97 9,380,000 9,380,000
--------------
TOTAL INVESTMENTS (AMORTIZED COST
$1,161,409,909)(A) -- 99.9%....... 1,161,409,909
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%............... 722,897
--------------
NET ASSETS -- 100.0%............... $1,162,132,806
==============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $1,162,132,806.
(a) Cost for federal income tax and financial reporting purposes is
substantially the same.
AMBAC -- AMBAC Indemnity Corporation.
AMT -- Interest on securities subject to Federal Alternative Minimum Tax.
FGIC -- Financial Guaranty Insurance Company.
FSA -- Financial Security Assurance.
LOC -- Letter of Credit.
MBIA -- Municipal Bond Insurance Association.
NR -- No rating assigned by Moody's or S&P.
* Variable rate security. Maturity date reflects the next rate change date.
+ The ratings provided consist of short-term and long-term ratings.
See Notes to Financial Statements.
28
<PAGE> 163
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY MARKET
FUND FUND
------------ --------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (amortized cost
$675,378,762, and $1,161,409,909, respectively)......... $675,378,762 $1,161,409,909
Interest Receivable....................................... 4,987,487 6,802,369
Receivable for investment securities sold................. 21,000,000 9,700,000
Receivable for capital shares sold........................ 5,411,487 9,219,947
Prepaid expenses.......................................... 48,551 38,659
Other assets.............................................. 1,612 13,911
------------ --------------
Total Assets............................................... 706,827,899 1,187,184,795
------------ --------------
LIABILITIES:
Payable to bank........................................... 1,756,798 192,929
Dividends payable......................................... 1,746,201 2,894,338
Payable for investment securities purchased............... 52,984,115 5,000,000
Payable for capital shares redeemed....................... 1,486,389 16,339,160
Investment advisory fees payable.......................... 55,123 101,023
Administration fees payable............................... 55,123 101,023
Special management fees payable (Pacific Horizon
Shares)................................................. 68,056 150,624
Shareholder service fees payable (Horizon Service
Shares)................................................. 43,461 114,766
Shareholder service fees payable (X Shares)............... -- 13,484
Shareholder service fees payable (S Shares)............... 781 6,414
12b-1 fees payable (X Shares)............................. -- 11,822
12b-1 fees payable (S Shares)............................. 2,549 22,089
Custodian and fund accounting fees payable................ 40,774 20,333
Transfer agent fees payable............................... 7,845 194
Legal fees payable........................................ 14,078 22,403
Other accrued expenses.................................... 7,603 45,012
Other liabilities......................................... 114,496 16,375
------------ --------------
Total Liabilities.......................................... 58,383,392 25,051,989
------------ --------------
NET ASSETS................................................. $648,444,507 $1,162,132,806
============ ==============
NET ASSETS:
Pacific Horizon Shares.................................... $125,645,416 $ 552,976,956
Horizon Shares............................................ 314,659,354 --
Horizon Service Shares.................................... 201,920,043 530,276,082
X Shares.................................................. -- 42,026,222
S Shares.................................................. 6,219,694 36,853,546
------------ --------------
Total...................................................... $648,444,507 $1,162,132,806
============ ==============
Shares Outstanding ($0.001 par value, 7.5 billion and 3
billion shares authorized):
Pacific Horizon Shares.................................... 125,673,075 552,990,812
Horizon Shares............................................ 314,809,976 --
Horizon Service Shares.................................... 201,952,032 530,313,144
X Shares.................................................. -- 42,027,842
S Shares.................................................. 6,219,699 36,853,653
------------ -------------
Total...................................................... 648,654,782 1,162,185,451
============ =============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE
PER SHARE................................................. $1.00 $1.00
===== =====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 648,655 $ 1,162,185
Additional paid-in capital................................ 647,969,431 1,160,959,805
Accumulated undistributed net investment income........... 52,442 62,301
Accumulated net realized losses on investment
transactions............................................ (226,021) (51,485)
------------ --------------
NET ASSETS, AUGUST 31, 1997................................ $648,444,507 $1,162,132,806
============ ==============
</TABLE>
- ---------------
See Notes to Financial Statements.
29
<PAGE> 164
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY MARKET
FUND FUND
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................. $10,669,668 $18,881,760
----------- -----------
EXPENSES:
Investment advisory fees............................. 287,597 525,653
Administration fees.................................. 287,597 525,653
Special management fees (Pacific Horizon Shares)..... 166,410 812,875
Shareholder service fees (Horizon Service Shares).... 230,549 624,698
Shareholder service fees (X Shares).................. -- 46,648
Shareholder service fees (S Shares).................. 895 7,728
12b-1 fees (X Shares)................................ -- 55,978
12b-1 fees (S Shares)................................ 2,686 23,185
Custodian and fund accounting fees................... 94,928 77,938
Transfer Agent fees.................................. 30,751 38,615
Legal fees........................................... 23,384 43,438
Other expenses....................................... 91,345 103,854
----------- -----------
Total Expenses..................................... 1,216,142 2,886,263
Less: Fee waivers.................................... (1,611) (13,911)
Expenses paid by third parties................. (6,862) (14,109)
----------- -----------
Total Net Expenses..................................... 1,207,669 2,858,243
----------- -----------
NET INVESTMENT INCOME.................................. 9,461,999 16,023,517
----------- -----------
NET REALIZED LOSSES ON INVESTMENTS:
Net realized losses on investment transactions....... (37,994) (40,625)
----------- -----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $ 9,424,005 $15,982,892
=========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
30
<PAGE> 165
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT
TAX-EXEMPT MONEY FUND MONEY MARKET FUND
----------------------------------- -----------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED
1997 FEBRUARY 28, 1997 FEBRUARY 28,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------ --------------- -------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income......... $ 9,461,999 $ 13,859,405 $ 16,023,517 $ 24,332,592
Net realized gains (losses) on
investment transactions..... (37,994) (26,740) (40,625) 26,388
------------ --------------- -------------- ---------------
Change in net assets resulting
from operations............. 9,424,005 13,832,665 15,982,892 24,358,980
------------ --------------- -------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Pacific Horizon Shares........ (1,619,004) (1,704,176) (7,695,663) (14,425,062)
Horizon Shares................ (4,896,550) (8,858,516) -- --
Horizon Service Shares........ (2,936,518) (3,296,713) (7,721,952) (9,708,150)
S Shares...................... (9,927)(c) -- (81,844)(b) --
X Shares...................... -- -- (524,058) (199,380)(a)
------------ --------------- -------------- ---------------
Change in net assets from
shareholder distributions..... (9,461,999) (13,859,405) (16,023,517) (24,332,592)
------------ --------------- -------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares Issued... 786,510,190 1,611,040,281 1,444,000,127 2,140,307,421
Dividends reinvested.......... 2,021,033 2,774,538 10,161,314 19,760,377
Cost of shares redeemed....... (659,582,299) (1,481,260,268) (1,285,710,000) (1,897,767,756)
------------ --------------- -------------- ---------------
Change in net assets from
capital share transactions.... 128,948,924 132,554,551 168,451,441 262,300,042
------------ --------------- -------------- ---------------
Change in net assets........... 128,910,930 132,527,811 168,410,816 262,326,430
NET ASSETS
Beginning of Period........... 519,533,577 387,005,766 993,721,990 731,395,560
------------ --------------- -------------- ---------------
End of Period................. $648,444,507 $ 519,533,577 $1,162,132,806 $ 993,721,990
============ =============== ============== ===============
</TABLE>
- ---------------
(a) Period from October 2, 1996 (inception date) to February 28, 1997.
(b) Period from June 18, 1997 (inception date) to August 31, 1997.
(c) Period from July 8, 1997 (inception date) to August 31, 1997.
See Notes to Financial Statements.
31
<PAGE> 166
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen portfolios. The accompanying
financial statements and notes are those of the Pacific Horizon Tax-Exempt Money
Fund (the "Tax-Exempt Fund") and Pacific Horizon California Tax-Exempt Money
Market Fund (the "California Tax-Exempt Fund"), collectively the "Funds",
individually the "Fund".
The Tax-Exempt Fund issues four classes of shares (Pacific Horizon Shares,
Horizon Shares, Horizon Service Shares and effective July 8, 1997, S Shares) and
California Tax-Exempt Fund issues four classes of shares (Pacific Horizon
Shares, Horizon Service Shares, and effective October 2, 1996, X Shares and
effective June 18, 1997, S Shares). The California Tax-Exempt Fund is authorized
to issue a fourth class of shares (Horizon Shares). Pacific Horizon Shares have
a Special Management Services Agreement/Plan while the Horizon Service Shares
have a Shareholder Services Plan. X Shares and S Shares have a Distribution and
Services Plan.
The Funds' seek to provide as high a level of current interest income exempt
from federal income taxes as is consistent with relative stability of principal
and daily liquidity. In addition, the California Tax-Exempt Fund seeks to
provide income that is also exempt from California state income taxes.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund, through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
32
<PAGE> 167
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The securities of the Funds 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 principal amount due at maturity and initial
cost. In addition, the portfolios 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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses from security transactions are recorded on an
identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses (other than class specific expenses) and
realized and unrealized gains and losses on investments of a fund are allocated
to each class of shares based upon their relative net asset value on the date
income
33
<PAGE> 168
is earned or expenses and realized and unrealized gains and losses are incurred.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income is declared as a dividend daily, and paid
monthly, to shareholders of record at the close of business on record date. Net
realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains of the Funds can be
offset by capital loss carryovers of the Funds, such gains will not be
distributed. Dividends and distributions are recorded by the Funds on the
ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET GAIN/(LOSS)
INVESTMENT ON
INCOME INVESTMENTS
------------- ------------
<S> <C> <C>
Tax-Exempt Fund $52,442 $(15,746)
California Tax-
Exempt Fund -- (659)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely all of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the Tax-Exempt Fund and California Tax-Exempt Fund had
the following capital loss carryovers:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
FUND CARRYOVER DATE
- ------------------------- ------------ -----------
<S> <C> <C>
Tax-Exempt Fund $ 16,664 1998
14,011 2000
71,218 2002
19,132 2003
36,425 2004
30,577 2005
-------
$188,027
=======
California Tax-Exempt
Fund $ 4,266 2004
=======
</TABLE>
To the extent that these loss carryovers are used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders. During the year ended February 28, 1997, the California Tax-Exempt
Fund utilized $32,982 of its available capital loss carryover to offset realized
capital gains for federal income tax purposes,
34
<PAGE> 169
while $35,348 of capital loss carryovers expired for the Tax-Exempt Fund.
Capital losses incurred after October 31 for the California Tax-Exempt Fund
are deemed to arise on the first business day of the following fiscal year for
tax purposes. The Fund has incurred and elected to defer capital losses of
$6,594 after October 31, 1996.
OTHER:
The Funds maintain a cash balance with its custodian and receives a
reduction of its custody fees and expenses for the amount of interest earned on
such uninvested cash balances. For financial reporting purposes for the six
months ended August 31, 1997, custodian fees and expenses paid by third parties
were increased by $6,862 and $14,109 for the Tax-Exempt Fund and California Tax-
Exempt Fund. There was no effect on net investment income. The Fund could have
invested such cash amounts in income producing assets if it had not agreed to a
reduction of fees or expenses under the expense offset arrangement with its
custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America. For
the six months ended August 31, 1997, the Funds had an Administration Agreement
with BISYS and a Distribution Agreement with the Distributor. Bank of America is
entitled to a fee from each Fund, which is accrued daily and payable monthly, at
an annual rate of 0.10% of each Fund's first $3 billion of net assets, plus
0.09% of each Fund's next $2 billion of net assets, plus 0.08% of each Fund's
net assets in excess of $5 billion. BISYS is entitled to a fee from each Fund
which is accrued daily and payable monthly, at an annual rate of 0.10% of each
Fund's first $7 billion of net assets, plus 0.09% of each Fund's next $3 billion
of net assets, plus 0.08% of each Fund's net assets in excess of $10 billion.
The Funds have entered into a Special Management Services Agreement (the
"Services Agreement") pursuant to which they agree to pay Bank of America and
BISYS 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% and 0.35%
for the Tax-Exempt Money Fund and California Tax-Exempt Fund, respectively, of
the average daily net assets of the outstanding Pacific Horizon Shares of each
Fund. Fees under the Services Agreement are borne solely by the Pacific Horizon
Shares.
Effective January 1997, the Services Agreement was terminated. The Funds
have adopted a Special Management Services Plan (the "Services Plan") pursuant
to which Service Organizations agree to provide certain services to their
clients who are beneficial owners of Pacific Horizon Shares in return for a
payment by the Funds of a fee at an annual rate of 0.32% and 0.35% for the
Tax-Exempt Money Fund and California Tax-Exempt Fund, respectively, of the
average daily net assets of the outstanding Pacific Horizon Shares of each Fund.
Currently, the California Tax-Exempt Fund is waiving 0.03% in special management
fees. Fees under the Services Plan are borne solely by the Pacific Horizon
Shares. Service Organiza-
35
<PAGE> 170
tions may include Bank of America, BISYS and its affiliates. For the six months
ended August 31, 1997, the Funds were advised that Bank of America and its
affiliates and BISYS earned the following amounts pursuant to the Services
Agreement and Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES BISYS
- ------------------------- ----------- ------
<S> <C> <C>
Tax-Exempt Fund $162,947 $2,939
California Tax-Exempt
Fund 807,230 5,548
</TABLE>
The Funds have also adopted a Shareholder Services Plan (the "Horizon
Services 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 Funds of a fee at an annual rate of 0.25% of the
average daily net assets of the Horizon Service Shares. Fees under the Horizon
Services Plan are borne solely by the Horizon Service Shares. Service
Organizations may include the Distributor, Bank of America and its affiliates.
For the six months ended August 31, 1997, the Funds were advised that Bank of
America and its affiliates earned the following amounts pursuant to the Horizon
Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
Tax-Exempt Fund $189,273
California Tax-Exempt Fund 512,823
</TABLE>
The California Tax-Exempt Fund has adopted the Distribution and Services
Plan under which the Funds pay 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 such Fund's X Shares. For the six months ended August 31, 1997 the
Funds were advised that Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
California Tax-Exempt Fund $46,481
</TABLE>
The Funds have adopted the Distribution and Services Plan under which the
Fund pays the Distributor and Service Organization for the provision of support
services with respect to the beneficial owners of S shares. Payments for the
distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%, respectively, of the average daily net assets of
the Funds' S shares. For the period from July 8, 1997(date of inception) to
August 31, 1997 the Fund was advised that Bank of America and its affiliates
earned the following amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
Tax-Exempt Fund $ 895
California Tax-Exempt Fund $7,718
</TABLE>
Prior to February 28, 1997, BankAmerica Corporation obtained a letter of
credit issued by a third-party financial institution which guaranteed the
payment of principal and interest of a security issued by Orange County
California that was held by the California Tax-Exempt Fund. This letter of
credit enabled the security, together with the letter of credit, to be valued at
par. BankAmerica Corporation agreed to reimburse the
36
<PAGE> 171
third-party financial institution to the extent any portion of this letter of
credit is drawn down. During the year ended February 28, 1997, this letter of
credit expired. The Orange County California Securities previously held by the
California Tax-Exempt Fund were substituted with a new issue from Orange County,
which does not require such letter of credit.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities for the Funds, BISYS Ohio earned $30,751 and $38,615 from
the Tax-Exempt Fund and California Tax-Exempt Fund, respectively, for the six
months ended August 31, 1997.
For the six months ended August 31, 1997, the Tax-Exempt Fund and California
Tax-Exempt Fund incurred legal charges totaling $23,384 and $43,438
respectively, which were earned by a law firm, a partner of which serves as
Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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 pursuant to the Retirement Plan
amounted to $2,471 and $1,987 for the Tax-Exempt Fund and California Tax-Exempt
Fund respectively, for the six months ended August 31, 1997.
37
<PAGE> 172
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Tax-Exempt Fund invests substantially all of its assets in a diversified
portfolio of tax-exempt debt obligations. The California Tax-Exempt Fund invests
substantially all of its assets in a nondiversified portfolio of tax-exempt debt
obligations primarily consisting of issuers in the State of California. The
issuers' abilities to meet their obligations may be affected by economic,
regional or political developments.
The Tax-Exempt Fund and the California Tax-Exempt Fund had the following
concentrations by industry sector at August 31, 1997 (as a percentage of total
investments):
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
FUND FUND
---------- ----------
<S> <C> <C>
Airport Facilities 1.5% 0.8%
Commercial Paper 16.4 22.0
Education 6.4 1.3
General Obligations 11.7 5.8
Healthcare 19.0 7.9
Housing Developments 7.1 14.5
Industrial Development
Revenue 5.2 3.6
Leases 1.5 3.6
Miscellaneous 2.8 0.3
Pollution Control 7.1 8.6
Power Projects 2.5 --
Revenue 10.7 17.9
Sewer Projects -- 4.5
Special Tax -- 0.4
Solid Waste 0.6 --
Transportation 3.0 5.1
Utilities 2.1 2.0
Waste Management 1.4 --
Water Projects 1.0 1.7
------ ------
100.0% 100.0%
====== ======
</TABLE>
38
<PAGE> 173
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of each Portfolio (at $1.00 per share) for the
periods indicated are summarized below:
<TABLE>
<CAPTION>
TAX-EXEMPT CALIFORNIA TAX-EXEMPT
MONEY FUND MONEY MARKET FUND
------------------------------------- -------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997 AUGUST 31, 1997 FEBRUARY 28, 1997
---------------- ----------------- ---------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Pacific Horizon Shares
Issued................. 107,335,976 230,496,897 472,684,566 917,590,384
Reinvested............. 1,286,411 1,545,273 6,297,080 13,790,272
Redeemed............... (69,393,203) (195,234,875) (419,052,410) (966,354,368)
----------- ----------- ------------ -----------
Net
increase/(Decrease).... 39,229,184 36,807,295 59,929,236 (34,973,712)
=========== =========== ============ ===========
Horizon Shares
Issued................. 423,971,615 997,203,792 -- --
Reinvested............. 25,652 135,161 -- --
Redeemed............... (373,441,909) (1,035,902,063) -- --
----------- ----------- ------------ -----------
Net increase/
(Decrease)........... 50,555,358 (38,563,110) -- --
=========== =========== ============ ===========
Horizon Service Shares
Issued................. 248,702,939 383,339,592 877,065,089 1,184,396,760
Reinvested............. 655,199 1,094,104 3,431,872 5,770,710
Redeemed............... (216,413,455) (250,123,330) (821,759,112) (921,990,855)
----------- ----------- ------------ -----------
Net increase............ 32,944,683 134,310,366 58,737,849 268,176,615
=========== =========== ============ ===========
X Shares
Issued................. -- -- 45,086,213 38,320,277
Reinvested............. -- -- 420,087 199,395
Redeemed............... -- -- (32,575,597) (9,422,533)
----------- ----------- ------------ -----------
Net increase............ -- -- 12,930,703 29,097,139(a)
=========== =========== ============ ===========
S Shares
Issued................. 6,552,102 -- 49,164,259 --
Reinvested............. 1,329 -- 12,275 --
Redeemed............... (333,732) -- (12,322,881) --
----------- ----------- ------------ -----------
Net increase............ 6,219,699(c) -- 36,853,653(b) --
=========== =========== ============ ===========
</TABLE>
- ---------------
(a) Period from October 2, 1996 (inception date) to February 28, 1997.
(b) Period from June 18, 1997 (inception date) to August 31, 1997.
(c) Period from July 8, 1997 (inception date) to August 31, 1997.
39
<PAGE> 174
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD
AUGUST 31, ------------------------------------------ ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994(A)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0157 0.0290 0.0327 0.0253 0.0124
Less dividends to shareholders from
net investment income............. (0.0157) (0.0290) (0.0327) (0.0253) (0.0124)
------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- -- -- -- --
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
======= ======= ======= ======= =======
Total return....................... 1.58%(d) 2.94% 3.32% 2.56% 1.25%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 126 $ 86 $ 50 $ 37 $50
Ratio of expenses to average net
assets.......................... 0.60%(c) 0.60% 0.63% 0.60% 0.60%(c)
Ratio of net investment income to
average net assets.............. 3.12%(c) 2.91% 3.26% 2.47% 1.95%(c)
Ratio of expenses to average net
assets*......................... (e) (b) (b) (b) 0.61%(c)
Ratio of net investment income to
average net assets*............. (e) (b) (b) (b) 1.94%(c)
</TABLE>
- ---------------
* 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.
(a) Period from July 9, 1993 (inception date) to February 28, 1994.
(b) There were no fee waivers or expense reimbursements during the period.
(c) Annualized.
(d) Not Annualized.
(e) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
40
<PAGE> 175
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income....... 0.0173 0.0322 0.0359 0.0285 0.0225 0.0269
Less dividends to
shareholders from net
investment income........... (0.0173) (0.0322) (0.0359) (0.0285) (0.0225) (0.0269)
-------- -------- -------- -------- -------- --------
Net change in net asset value
per share................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return................. 1.75%(c) 3.27% 3.65% 2.89% 2.27% 2.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................ $ 315 $ 264 $ 303 $ 382 $ 515 $ 384
Ratio of expenses to average
net assets................ 0.28%(b) 0.28% 0.31% 0.28% 0.28% 0.28%
Ratio of net investment
income to average net
assets.................... 3.42%(b) 3.22% 3.58% 2.81% 2.25% 2.69%
Ratio of expenses to average
net assets*............... (d) (a) (a) (a) 0.29% (a)
Ratio of net investment
income to average net
assets*................... (d) (a) (a) (a) 2.24% (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Annualized.
(c) Not annualized.
(d) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
41
<PAGE> 176
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income.... 0.0161 0.0297 0.0334 0.0260 0.0200 0.0244
Less dividends to
shareholders from net
investment income........ (0.0161) (0.0297) (0.0334) (0.0260) (0.0200) (0.0244)
-------- -------- -------- -------- -------- --------
Net change in net asset
value per share.......... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return.............. 1.62%(c) 3.01% 3.39% 2.63% 2.02% 2.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (millions)...... $ 202 $ 169 $ 35 $ 39 $ 48 $ 50
Ratio of expenses to
average net assets..... 0.53%(b) 0.53% 0.56% 0.53% 0.53% 0.53%
Ratio of net investment
income to average net
assets................. 3.19%(b) 2.98% 3.34% 2.57% 2.04% 2.42%
Ratio of expenses to
average net assets*.... (d) (a) (a) (a) 0.57% (a)
Ratio of net investment
income to average net
assets*................ (d) (a) (a) (a) 2.00% (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Annualized.
(c) Not annualized.
(d) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
42
<PAGE> 177
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD......... $ 1.00
Income from Investment Operations:
Net investment income................................ 0.0042
Less dividends to shareholders from net investment
income............................................... (0.0042)
--------
Net change in net asset value per share................ --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD............... $ 1.00
========
Total return........................................... 1.55%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............... $ 6
Ratio of expenses to average net assets.............. 0.83%(c)
Ratio of net investment income to average net
assets............................................. 2.77%(c)
Ratio of expenses to average net assets*............. (b)
Ratio of net investment income to average net
assets*............................................ (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 8, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
43
<PAGE> 178
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ----------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income....... 0.0153 0.0284 0.0324 0.0249 0.0186 0.0224
Net realized gains/(losses)
on investment
transactions.............. -- -- (0.0001) (0.0001) 0.0002 (0.0002)
-------- -------- -------- -------- -------- --------
Total income from investment
operations.................. 0.0153 0.0284 0.0323 0.0248 0.0188 0.0222
Less dividends to
shareholders from net
investment income........... (0.0153) (0.0284) (0.0324) (0.0249) (0.0186) (0.0224)
-------- -------- -------- -------- -------- --------
Net change in net asset value
per share................... -- -- (0.0001) (0.0001) 0.0002 (0.0002)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return................. 1.54%(d) 2.88% 3.29% 2.52% 1.88% 2.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................ $ 553 $ 493 $ 528 $ 187 $ 204 $ 128
Ratio of expenses to average
net assets................ 0.57%(c) 0.57% 0.62% 0.62% 0.66% 0.66%
Ratio of net investment
income to average net
assets.................... 3.03%(c) 2.83% 3.35% 2.48% 1.86% 2.21%
Ratio of expenses to average
net assets*............... (b) 0.60%** 0.63%** (a) 0.68% 0.74%
Ratio of net investment
income to average net
assets*................... (b) 2.80% (b) (a) 1.84% 2.13%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the
Portfolio received credits from its custodian for interest earned on
uninvested cash balances which were used to offset custodian fees and
expenses. If such credits had not occurred, the expense ratio would have
been as indicated. The ratio of net investment income was not affected.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
44
<PAGE> 179
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................... 0.0157 0.0291 0.0331 0.0256 0.0198
Net realized gains/(losses) on investment
transactions........................... -- -- 0.0001 (0.0001) (0.0001)
-------- -------- -------- -------- --------
Total income from investment operations... 0.0157 0.0291 0.0332 0.0255 0.0197
Less dividends to shareholders from net
investment income........................ (0.0157) (0.0291) (0.0331) (0.0256) (0.0198)
-------- -------- -------- -------- --------
Net change in net asset value per share... -- -- 0.0001 (0.0001) (0.0001)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return.............................. 1.58%(d) 2.95% 3.36% 2.59% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)... $ 530 $ 472 $ 203 $ 88 $ 124
Ratio of expenses to average net
assets................................. 0.50%(c) 0.50% 0.55% 0.55% 0.53%
Ratio of net investment income to average
net assets............................. 3.09%(c) 2.92% 3.43% 2.50% 1.98%
Ratio of expenses to average net
assets*................................ (b) (b) 0.55%** (a) 0.60%
Ratio of net investment income to average
net assets*............................ (b) (b) 3.42% (a) 1.91%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the year ended February 29, 1996 the Portfolio received credits from
its custodian for interest earned on uninvested cash balances which were
used to offset custodian fees and expenses. If such credits had not
occurred, the expense ratio would have been as indicated. The ratio of net
investment income was not affected.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
45
<PAGE> 180
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
AUGUST
31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (A)
--------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD................................ $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income................. 0.0142 0.0107
Less dividends to shareholders from net
investment income..................... (0.0142) (0.0107)
-------- --------
Net change in net asset value per
share................................. -- --
-------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD................................ $ 1.00 $ 1.00
======== ========
Total return............................ 1.85% (d) 1.09%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions).......................... $ 42 $ 29
Ratio of expenses to average net
assets.............................. 0.80% (c) 0.80%(c)
Ratio of net investment income to
average net assets.................. 2.81% (c) 2.66%(c)
Ratio of expenses to average net
assets*............................. (b ) (b)
Ratio of net investment income to
average net assets*................. (b ) (b)
</TABLE>
- ---------------
* 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.
(a) Period from October 2, 1996 (inception date) to February 29, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
46
<PAGE> 181
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
----------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0057
Less dividends to shareholders from net investment
income................................................. (0.0057)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 1.85%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 37
Ratio of expenses to average net assets................ 0.80%(c)
Ratio of net investment income to average net assets... 2.65%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from June 18, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
47
<PAGE> 182
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 183
---------------
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
---------------
[PACIFIC HORIZON FUNDS LOGO]
Provident Distributor, Inc., Distributor
TXM-0015 10/97
<PAGE> 184
PACIFIC HORIZON MUTUAL FUNDS
SEMI-ANNUAL REPORT
AUGUST 31, 1997
S SHARES OF THE
PRIME FUND
TAX-EXEMPT MONEY FUND
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
INVESTING FOR ALL
THE TIMES OF YOUR LIFE
NOT FDIC INSURED
PACIFIC HORIZON MUTUAL FUNDS
<PAGE> 185
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 186
CONTENTS
<TABLE>
<S> <C>
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 2-3
.
. TAXABLE MONEY MARKET FUND
.
. Portfolio of Investments 4-12
.
. Statement of Assets
. and Liabilities 13
.
. Statement of Operations 14
.
. Statements of Changes
. in Net Assets 15
.
. Notes to Financial Statements 16-22
.
. Financial Highlights 23-28
.
. TAX-EXEMPT MONEY MARKET FUNDS
.
. Portfolios of Investments 29-47
.
. Statements of Assets
. and Liabilities 48
.
. Statements of Operations 49
.
. Statements of Changes
. in Net Assets 50
.
. Notes to Financial Statements 51-58
.
. Financial Highlights 59-66
</TABLE>
<PAGE> 187
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
2
<PAGE> 188
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
3
<PAGE> 189
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 3.8%
DOMESTIC -- 3.2%
American Express Centurion Bank
Monthly Variable Rate (final
maturity 1/9/98)*.............. A1/P1 5.61% 09/09/97 $ 25,000,000 $ 24,999,318
American Express Centurion Bank
Monthly Variable Rate (final
maturity 4/15/98)*............. A1/P1 5.62% 09/15/97 50,000,000 50,000,000
American Express Centurion Bank
Monthly Variable Rate (final
maturity 6/26/98)*............. A1/P1 5.60% 09/26/97 25,000,000 25,000,000
Bank of New York................. A1/P1 6.10% 05/22/98 25,000,000 24,981,100
Huntington National Bank......... A1/P1 5.94% 08/31/98 50,000,000 49,971,415
PNC Bank, N.A., Monthly Variable
Rate (final maturity
10/01/97)*..................... A1/P1 5.52% 09/02/97 25,000,000 24,998,382
PNC Bank, N.A., Monthly Variable
Rate (final maturity
11/25/97)*..................... A1/P1 5.52% 09/25/97 50,000,000 49,963,450
--------------
TOTAL DOMESTIC BANK NOTES......... 249,913,665
--------------
FOREIGN -- 0.6%
Abbey National Treasury Services,
PLC............................ A1/P1 6.00% 06/17/98 50,000,000 49,997,726
--------------
TOTAL BANK NOTES (AMORTIZED COST
$299,911,391).................... 299,911,391
--------------
CERTIFICATE OF DEPOSIT -- 18.9%
DOMESTIC -- 5.0%
Bankers Trust Company, Daily
Variable Rate (final maturity
07/21/98)*..................... A1/P1 5.65% 09/02/97 25,000,000 24,989,321
Bankers Trust Company, Daily
Variable Rate (final maturity
9/30/97)*...................... A1/P1 5.62% 09/02/97 50,000,000 49,997,695
Bankers Trust Company, Weekly
Variable Rate (final maturity
10/16/97)*..................... A1/P1 5.50% 09/03/97 25,000,000 24,997,139
Bankers Trust Company, Weekly
Variable Rate (final maturity
12/10/97)*..................... A1/P1 5.56% 09/03/97 25,000,000 24,996,575
Bankers Trust Company, Weekly
Variable Rate (final maturity
07/07/98)*..................... A1/P1 5.66% 09/03/97 50,000,000 49,971,403
Crestar Bank..................... A1/P1 5.49% 09/19/97 25,000,000 25,000,000
Crestar Bank..................... A1/P1 5.63% 11/20/97 50,000,000 50,001,644
Crestar Bank..................... A1/P1 5.80% 04/08/98 50,000,000 50,000,000
Crestar Bank..................... A1/P1 5.86% 07/20/98 50,000,000 49,991,561
Morgan Guaranty Trust Company.... A1/P1 5.80% 07/28/98 25,000,000 24,991,346
Morgan Guaranty Trust Company.... A1/P1 5.87% 08/06/98 25,000,000 24,993,337
--------------
TOTAL DOMESTIC.................... 399,930,021
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
4
<PAGE> 190
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
EURO -- 0.9%
Sumitomo Bank, Ltd., London...... A1/P1 5.76% 10/15/97 $ 50,000,000 $ 50,000,602
Sumitomo Bank, Ltd., London...... A1/P1 5.77% 10/17/97 25,000,000 25,000,315
--------------
TOTAL EURO........................ 75,000,917
--------------
YANKEE -- 13.0%
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.85% 01/07/98 25,000,000 24,996,564
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.88% 01/13/98 25,000,000 24,998,244
Banque National de Paris,
Chicago........................ A1/P1 5.97% 07/01/98 25,000,000 24,984,140
Banque National de Paris,
Chicago........................ A1/P1 5.89% 07/21/98 25,000,000 24,993,240
Banque National de Paris,
Chicago........................ A1/P1 5.80% 07/31/98 25,000,000 24,989,085
Banque National de Paris, New
York........................... A1/P1 5.75% 02/26/98 25,000,000 24,994,054
BHF Bank of Aktiengesellschaft,
New York, Monthly Variable Rate
(final maturity 8/13/98)*...... A1/P1 5.56% 09/15/97 50,000,000 49,981,553
Canadian Imperial Bank of
Commerce, New York............. A1/P1 5.87% 08/11/98 25,000,000 24,980,849
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.83% 09/02/97 25,000,000 25,000,007
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.94% 12/16/97 55,500,000 55,511,349
Industrial Bank of Japan, New
York........................... A1/P1 5.94% 12/04/97 50,000,000 50,001,267
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/10/97 50,000,000 50,001,356
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/11/97 50,000,000 50,001,369
Istituto Bancario San Paolo Di
Torino, New York............... A1/P1 5.87% 07/20/98 50,000,000 49,987,345
Landesbank Hessen-Thuringen
Girozentrale, New York......... A1/P1 5.94% 06/19/98 25,000,000 24,988,570
National Australia Bank, New
York........................... A1/P1 5.80% 10/03/97 25,000,000 24,999,843
National Bank of Canada, New
York........................... A1/P1 6.15% 05/15/98 44,000,000 43,984,023
National Bank of Canada, New
York........................... A1/P1 6.14% 06/05/98 25,000,000 24,996,188
Royal Bank of Canada, New York... A1/P1 5.58% 12/11/97 25,000,000 24,991,983
Royal Bank of Canada, New York... A1/P1 5.65% 03/03/98 80,000,000 79,942,894
Societe Generale Bank, New York.. A1/P1 5.77% 01/09/98 25,000,000 24,996,590
Societe Generale Bank, New York.. A1/P1 5.59% 11/14/97 30,000,000 30,001,283
Societe Generale Bank, New York.. A1/P1 5.73% 10/15/97 15,000,000 15,002,168
Societe Generale Bank, New York.. A1/P1 5.77% 01/07/98 25,000,000 24,997,481
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 1/15/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,994,305
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 6/16/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,988,571
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 8/25/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,985,793
</TABLE>
- ---------------
See Notes to Financial Statements.
5
<PAGE> 191
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
YANKEE -- (CONTINUED)
Societe Generale Bank, New York,
Quarterly Variable Rate (final
maturity 12/24/97)*............ A1/P1 5.68% 09/24/97 $ 25,000,000 $ 24,994,534
Sumitomo Bank Ltd., New York..... A1/P1 5.60% 09/08/97 25,000,000 24,999,846
Westdeutsche Landes Bank Girozen
Trole, New York................ A1/P1 5.78% 07/31/98 35,000,000 34,992,741
Westpac Banking Corp., New
York........................... A1/P1 5.83% 01/22/98 25,000,000 24,998,125
Westpac Banking Corp., New
York........................... A1/P1 5.93% 08/12/98 25,000,000 24,990,964
--------------
TOTAL YANKEE...................... 1,034,266,324
--------------
TOTAL CERTIFICATE OF DEPOSIT
(AMORTIZED COST
$1,509,197,262).................. 1,509,197,262
--------------
COMMERCIAL PAPER -- 31.5%
DOMESTIC -- 26.9%
ASSET BACKED SECURITIES -- 9.3%
Aesop Funding Corp............... A1/P1 5.52% 09/19/97 33,300,000 33,208,092
Aesop Funding Corp............... A1/P1 5.52% 09/22/97 30,000,000 29,903,400
Aesop Funding Corp............... A1/P1 5.55% 10/02/97 40,000,000 39,808,833
Banc One Funding Corp............ A1/P1 5.53% 10/17/97 37,687,000 37,420,699
Beta Finance Inc................. A1/P1 5.53% 09/24/97 50,000,000 49,823,347
CC USA Inc....................... A1/P1 5.54% 11/05/97 21,500,000 21,284,940
CC USA Inc....................... A1/P1 5.55% 02/02/98 50,000,000 48,812,917
Corporate Asset Funding
Company........................ A1/P1 5.52% 10/17/97 50,000,000 49,647,333
Corporate Asset Funding
Company........................ A1/P1 5.54% 10/27/97 50,000,000 49,569,111
Enterprise Funding Corp. (b)..... A1/P1 5.52% 10/14/97 19,400,000 19,272,089
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 25,364,000 25,109,832
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 44,317,000 43,872,907
Golden Managers Acceptance
Corp........................... A1/P1 5.55% 09/19/97 45,000,000 44,875,125
Gotham Funding Corp.(b).......... A1/P1 5.70% 12/29/97 25,000,000 24,528,958
Riverwood Funding Corp........... A1/P1 5.52% 09/23/97 42,500,000 42,356,633
Riverwood Funding Corp........... A1/P1 5.52% 09/26/97 50,000,000 49,808,333
Sigma Finance Inc................ A1/P1 5.55% 10/14/97 50,000,000 49,668,542
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/04/97 35,000,000 34,655,911
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/05/97 50,000,000 49,500,764
--------------
TOTAL ASSET BACKED SECURITIES..... 743,127,766
--------------
AUTOMOBILES -- 3.5%
American Honda Finance Corp...... F1/P1 5.54% 10/22/97 30,000,000 29,764,550
American Honda Finance Corp...... F1/P1 5.55% 11/07/97 40,000,000 39,586,833
Daimler-Benz North America
Corp........................... A1/P1 5.61% 09/08/97 25,000,000 24,972,729
Daimler-Benz North America
Corp........................... A1/P1 5.51% 11/06/97 50,000,000 49,494,917
Daimler-Benz North America
Corp........................... A1/P1 5.52% 12/03/97 33,908,000 33,424,472
General Motors Acceptance Corp... P1/D1 5.40% 09/12/97 50,000,000 49,917,500
General Motors Acceptance Corp... P1/D1 5.82% 11/05/97 50,000,000 49,474,583
--------------
TOTAL AUTOMOBILES................. 276,635,584
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
6
<PAGE> 192
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANKING -- 3.3%
Bankers Trust, New York, Daily
Variable Rate (final maturity
11/7/97)*...................... A1/P1 5.72% 09/02/97 $ 25,000,000 $ 25,000,000
Bankers Trust, New York, Daily
Variable Rate (final maturity
1/9/98)*....................... A1/P1 5.74% 09/02/97 50,000,000 50,000,000
Svenska Handelsbanken, Inc....... A1/P1 5.52% 12/22/97 49,890,000 49,033,222
Unifunding, Inc.................. A1/P1 5.52% 10/20/97 36,000,000 35,729,520
Unifunding, Inc.................. A1/P1 5.55% 11/18/97 50,000,000 49,398,750
Unifunding, Inc.................. A1/P1 5.56% 12/11/97 50,000,000 49,220,056
--------------
TOTAL BANKING..................... 258,381,548
--------------
BROKERAGE SERVICES -- 3.1%
Lehman Brothers Holdings, Inc.... A1/F1 5.57% 09/19/97 50,000,000 49,860,750
Lehman Brothers Holdings, Inc.... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
Lehman Brothers Holdings, Inc.,
Weekly Variable Rate (final
maturity 4/03/98)*............. A1/F1 5.78% 09/08/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc......... A1/P1 5.53% 12/12/97 25,000,000 24,608,292
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Smith Barney Holdings, Inc....... A1/P1 5.52% 10/06/97 50,000,000 49,731,667
--------------
TOTAL BROKERAGE SERVICES.......... 247,466,716
--------------
CHEMICALS-DIVERSIFIED -- 0.2%
AKZO Nobel Inc................... A1/P1 5.62% 10/10/97 20,000,000 19,878,233
--------------
CONGLOMERATES -- 0.3%
B.A.T. Capital Corp.............. A1/P1 5.62% 09/03/97 25,000,000 24,992,194
--------------
CONSUMER NON-DURABLES -- 1.6%
Newell Co........................ A1/D1 5.54% 09/29/97 40,000,000 39,827,644
Newell Co........................ A1/D1 5.55% 10/29/97 50,000,000 49,552,917
Newell Co........................ A1/D1 5.56% 11/05/97 40,000,000 39,598,444
--------------
TOTAL CONSUMER NON-DURABLES....... 128,979,005
--------------
FINANCE COMPANIES -- 1.7%
Countrywide Home Loans, Inc...... A1/F1 5.63% 09/02/97 34,000,000 33,994,683
Countrywide Home Loans, Inc...... A1/F1 5.60% 09/19/97 25,000,000 24,930,000
Countrywide Home Loans, Inc...... A1/F1 5.52% 10/22/97 50,000,000 49,609,000
Countrywide Home Loans, Inc...... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
--------------
TOTAL FINANCE COMPANIES........... 133,229,204
--------------
INSURANCE -- 0.3%
Marsh & Mclennan Companies,
Inc............................ A1/P1 5.75% 02/20/98 28,000,000 27,230,778
--------------
PUBLISHING -- 0.6%
Tribune Company.................. A1/F1 5.55% 10/22/97 20,000,000 19,842,750
Tribune Company.................. A1/F1 5.65% 12/22/97 25,000,000 24,560,556
--------------
TOTAL PUBLISHING.................. 44,403,306
--------------
RELOCATION SERVICES -- 0.7%
PHH Corporation.................. A1/P1 5.58% 09/19/97 25,000,000 24,930,250
PHH Corporation.................. A1/P1 5.52% 10/31/97 35,000,000 34,678,000
--------------
TOTAL RELOCATION SERVICES......... 59,608,250
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
7
<PAGE> 193
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
SOVEREIGN ISSUES -- 0.6%
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 11/05/97 $ 29,500,000 $ 29,205,451
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 12/03/97 15,700,000 15,475,712
--------------
TOTAL SOVEREIGN ISSUES............ 44,681,163
--------------
UTILITIES -- 1.7%
Duke Capital Corp................ 5.56% 10/06/97 88,955,000 88,473,770
Edison International............. A1/P1 5.60% 10/22/97 50,000,000 49,603,333
--------------
TOTAL UTILITIES................... 138,077,103
--------------
TOTAL DOMESTIC COMMERCIAL PAPER... 2,146,690,850
--------------
FOREIGN -- 4.6%
AIR TRANSPORTATION -- 1.0%
BAA PLC.......................... A1/P1 5.53% 12/03/97 76,410,000 75,318,419
--------------
BUILDING SOCIETY -- 0.9%
Bradford & Bingley Building
Society........................ A1/P1 5.62% 12/29/97 50,000,000 49,071,139
Bradford & Bingley Building
Society........................ A1/P1 5.56% 02/17/98 25,000,000 24,347,472
--------------
TOTAL BUILDING SOCIETY............ 73,418,611
--------------
OIL AND GAS -- 0.5%
Repsol International Finance..... A1/P1 4.98% 09/09/97 40,000,000 39,950,222
--------------
SOVEREIGN ISSUES -- 1.6%
Cades............................ A1/P1 5.39% 10/03/97 50,000,000 49,760,667
Cades............................ A1/P1 5.41% 10/10/97 25,000,000 24,853,479
Cades............................ A1/P1 5.44% 11/14/97 50,000,000 49,440,889
--------------
TOTAL SOVEREIGN ISSUES............ 124,055,035
--------------
TELECOMMUNICATIONS -- 0.6%
Alcatel Alsthom, Inc............. A1/P1 5.60% 12/16/97 50,000,000 49,175,556
--------------
TOTAL FOREIGN COMMERCIAL PAPER.... 361,917,843
--------------
TOTAL COMMERCIAL PAPER (AMORTIZED
COST $2,508,608,693)............. 2,508,608,693
--------------
CORPORATE BOND -- 15.3%
ASSET BACKED SECURITIES -- 2.5%
CC USA, Inc...................... A1/P1 6.18% 05/26/98 20,000,000 20,002,393
Ciesco, L.P., Monthly Variable
Rate (final maturity
2/10/98)*...................... A1/P1 5.57% 09/12/97 75,000,000 74,996,671
Sigma Finance, Inc................ A1/P1 5.92% 03/05/98 50,000,000 49,991,984
Sigma Finance, Inc., Daily
Variable Rate (final maturity
7/27/98)*........................ A1/P1 5.68% 09/02/97 50,000,000 49,999,104
--------------
TOTAL ASSET BACKED SECURITIES..... 194,990,152
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
8
<PAGE> 194
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
AUTOMOBILES -- 2.3%
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/6/98)*.............. F1/P1 5.79% 10/06/97 $ 50,000,000 $ 49,994,265
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/9/98)*.............. F1/P1 5.75% 10/09/97 24,000,000 24,001,339
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 7/27/98)*............. F1/P1 5.72% 10/27/97 45,000,000 45,000,000
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 6/16/98)*............. F1/P1 5.81% 06/16/98 20,000,000 20,000,000
Ford Motor Credit Corp........... A1/P1 7.13% 12/01/97 25,000,000 25,089,658
General Motors Acceptance Corp.,
Quarterly Variable Rate (final
maturity 1/20/98)*............. F1/D1 5.82% 10/20/97 20,000,000 20,004,971
--------------
TOTAL AUTOMOBILES................. 184,090,233
--------------
BANKING -- 0.6%
Compagnie Bancaire USA Funding,
Daily Variable Rate (final
maturity 5/15/98)*............. A1/P1 5.79% 09/02/97 50,000,000 49,996,031
--------------
BROKERAGE SERVICES -- 4.5%
Bear Stearns Companies, Inc.,
Series B, Daily Variable Rate
(final maturity 3/17/98)*...... A1/P1 5.70% 09/02/97 75,000,000 75,000,000
Bear Stearns Companies, Inc.,
Series B, Monthly Variable Rate
(final maturity 4/1/98)*....... A1/P1 5.78% 09/02/97 18,000,000 18,015,439
C. S. First Boston, Inc., Daily
Variable Rate (final maturity
7/21/98)*...................... A1/P1 5.67% 09/02/97 50,000,000 50,000,000
C. S. First Boston, Inc., Weekly
Variable Rate (final maturity
5/15/98)*...................... A1/P1 5.61% 09/03/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
11/20/97)*..................... A1/P1 5.56% 09/03/97 50,000,000 49,997,874
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
1/29/98)*...................... A1/P1 5.59% 09/03/97 50,000,000 49,995,999
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
3/4/98)*....................... A1/P1 5.61% 09/03/97 19,000,000 18,985,204
Merrill Lynch & Co., Inc.,
Quarterly Variable Rate (final
maturity 11/13/97)*............ A1/P1 5.68% 11/13/97 50,000,000 49,997,008
--------------
TOTAL BROKERAGE SERVICES.......... 361,991,524
--------------
CONGLOMERATES -- 0.3%
Philip Morris Co., Inc............ A1/P1 9.00% 05/15/98 22,625,000 23,054,018
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
9
<PAGE> 195
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
FINANCE COMPANIES -- 2.1%
Associates Corp., North America.. A1/P1 6.63% 11/15/97 $ 20,000,000 $ 20,037,809
CIT Group Holdings, Inc.......... A1/P1 7.00% 09/30/97 29,700,000 29,728,947
Dean Witter Discover & Co........ A1/P1 6.00% 03/01/98 15,000,000 15,009,675
Household Finance Corp., Daily
Variable Rate (final maturity
5/28/98)*...................... A1/P1 5.72% 09/02/97 50,000,000 50,000,000
Household Finance Corp., Monthly
Variable Rate (final maturity
9/15/98)*...................... A1/P1 5.70% 09/15/97 50,000,000 50,043,350
--------------
TOTAL FINANCE COMPANIES........... 164,819,781
--------------
LEASING -- 1.8%
Sanwa Business Credit Corp.,
Daily Variable Rate (final
maturity 4/17/98)*............. P1/D1 5.84% 09/02/97 25,000,000 25,000,000
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 12/08/97)*............ P1/D1 5.80% 09/08/97 30,000,000 30,011,824
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 4/29/98)*............. P1/D1 5.76% 09/29/97 25,000,000 25,013,500
Sanwa Business Credit Corp.,
Quarterly Variable Rate (final
maturity 2/6/98)*.............. P1/D1 5.72% 11/06/97 25,000,000 24,998,918
USL Capital Corp., Series D,
Quarterly Variable Rate (final
maturity 4/22/98)*............... P1/F1 5.83% 10/22/97 34,000,000 34,022,741
--------------
TOTAL LEASING..................... 139,046,983
--------------
RELOCATION SERVICES -- 0.6%
PHH Corporation, Monthly Variable
Rate (final maturity
6/24/98)*...................... A1/P1 5.63% 09/24/97 50,000,000 50,000,000
--------------
RETAILING -- 0.6%
Sears Roebuck Acceptance Corp.... P1/F1 5.74% 10/02/97 50,000,000 49,999,569
--------------
TOTAL CORPORATE BOND (AMORTIZED
COST $1,217,988,291)............. 1,217,988,291
--------------
MASTER NOTE -- 7.5%
Goldman Sachs Group L.P. (final
maturity 1/16/98)*............. A1/P1 5.83% 09/02/97 300,000,000 300,000,000
Morgan Stanley Group, Inc. (final
maturity 3/24/98)*............. A1/P1 5.79% 09/02/97 300,000,000 300,000,000
--------------
TOTAL MASTER NOTE (AMORTIZED COST
$600,000,000).................... 600,000,000
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 196
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(C) -- 23.6%
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $50,833,610
(Collateralized by $50,930,000
various U.S. Government
Obligations, 6.15%-7.55%,
1/27/00 -- 6/10/04, market
value -- $51,819,652)............ 5.60% 09/02/97 $ 50,802,000 $ 50,802,000
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $80,049,956
(Collateralized by $80,725,000
U.S. Government Obligations,
6.40%-6.50%, 5/2/01 -- 2/25/02,
market value -- $81,602,028)..... 5.62% 09/02/97 80,000,000 80,000,000
First Chicago Capital Markets,
Inc., dated 8/29/97, with a
maturity value of $150,093,833
(Collateralized by $157,483,000
various U.S. Government
Obligations, 0.00% -- 7.89%,
9/11/97 -- 8/15/03, market
value -- $153,001,916)........... 5.63% 09/02/97 150,000,000 150,000,000
First National Bank of Chicago,
dated 8/29/97, with a maturity
value of $50,031,278
(Collateralized by $51,390,000
Federal National Mortgage
Association Note, 7.02%, 8/28/07,
market value -- $51,004,575)..... 5.63% 09/02/97 50,000,000 50,000,000
Fuju Securities, Inc., dated
8/29/97, with a maturity value of
$300,187,000 (Collateralized by
$318,677,000 various U.S.
Government Obligations, 0.00% --
10.35%, 9/4/97 -- 8/15/26, market
value -- $306,000,902)........... 5.61% 09/02/97 300,000,000 300,000,000
HSBC Securities, Inc., dated
8/29/97, with a maturity value of
$350,218,556 (Collateralized by
$351,407,000 various U.S.
Government Obligations, 0.00%-
9.25%, 9/2/97 -- 6/15/07, market
value -- $357,001,503)........... 5.62% 09/02/97 350,000,000 350,000,000
Lehman Brothers, Inc., dated
8/29/97, with a maturity value of
$41,031,969 (Collateralized by
$69,764,000 U.S. Treasury Notes,
0.00%, 8/15/03 -- 11/15/08,
market value -- $41,828,863)..... 5.48% 09/02/97 41,007,000 41,007,000
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 197
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----- -------- ------------ --------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(C) -- (CONTINUED)
Merrill Lynch Securities, dated
8/29/97, with a maturity value of
$100,062,444 (Collateralized by
$115,399,948 Federal National
Mortgage Association Notes,
5.50% -- 9.00%, 3/1/03 -- 9/1/26,
market value -- $102,002,243).... 5.62% 09/02/97 $100,000,000 $ 100,000,000
NationsBanc, Inc., dated 8/29/97,
with a maturity value of
$230,143,750 (Collateralized by
$233,746,164 various U.S.
Government Obligations, 0.00% --
9.50%, 9/2/97 -- 8/1/27, market
value -- $234,600,486)........... 5.63% 09/02/97 230,000,000 230,000,000
Nomura Securities, Inc., dated
8/29/97, with a maturity value of
$200,124,667 (Collateralized by
$265,004,426 Government National
Mortgage Association Notes,
6.00% -- 10.00%,
1/1/00 -- 8/20/27, market
value -- $204,000,000)........... 5.61% 09/02/97 200,000,000 200,000,000
Prudential Securities, Inc., dated
8/29/97, with a maturity value of
$250,155,556 (Collateralized by
$324,844,908 various U.S.
Government Obligations, 0.00%-
10.00%, 1/15/98 -- 8/1/27, market
value -- $255,000,250)........... 5.60% 09/02/97 250,000,000 250,000,000
Smith Barney, Inc., dated 8/29/97,
with a maturity value of
$80,049,778 (Collateralized by
$117,897,650 various U.S.
Government Obligations,0.00% --
8.00%, 7/15/08 -- 2/1/27, market
value -- $81,600,397)............ 5.60% 09/02/97 80,000,000 80,000,000
--------------
TOTAL REPURCHASE AGREEMENT
(AMORTIZED COST
$1,881,809,000).................. 1,881,809,000
--------------
TOTAL INVESTMENTS -- 100.6%
(AMORTIZED COST
$8,017,514,637)(A)............... 8,017,514,637
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.6%)................. (45,980,584)
--------------
NET ASSETS -- 100.0%.............. $7,971,534,053
==============
</TABLE>
- ---------
Percentages indicated are based on net assets of $7,971,534,053.
(a) Cost for federal income tax and financial reporting purposes are
substantially the same.
(b) Private placement security.
(c) The range of coupon rates and maturity dates are shown.
PLC -- Public Liability Company.
N.R.S.R.O. Nationally Recognized Statistical Ratings Organization. Rating
agencies that are included within the N.R.S.R.O. category are: S&P,
Moody's, Fitch Investors Services, Duff & Phelps, IBCA, and Thomsons
Bank Watch.
A1 -- Highest rating assigned by S&P and IBCA.
P1 -- Highest rating assigned by Moody's.
F1 -- Highest rating assigned by Fitch Investors.
D1 -- Highest rating assigned by Duff.
TBW1 -- Highest rating assigned by Thomsons Bank Watch.
Note: S&P and Moody's ratings have been used, unless another service has
assigned the security a higher rating.
* Variable rate security. Maturity date reflects the next interest rate change
date.
See Notes to Financial Statements.
12
<PAGE> 198
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (amortized cost $6,135,705,637).................... $6,135,705,637
Repurchase agreements (cost $1,881,809,000)............................................ 1,881,809,000
Cash................................................................................... 26,337
Interest Receivable.................................................................... 41,624,568
Receivable for capital shares sold..................................................... 184,015,784
Receivable for investment securities sold.............................................. 2,083,305,000
Prepaid expenses....................................................................... 1,290,198
--------------
Total Assets....................................................................... 10,327,776,524
--------------
LIABILITIES:
Dividends payable...................................................................... 35,043,189
Payable for investment securities purchased............................................ 1,981,823,530
Payable for capital shares redeemed.................................................... 335,925,601
Investment advisory fees payable....................................................... 602,283
Administration fees payable............................................................ 660,579
Special management fees payable (Pacific Horizon Shares)............................... 617,556
Shareholder service fees payable (Horizon Service Shares).............................. 661,706
Shareholder service fees payable (S Shares)............................................ 27,167
Shareholder service fees payable (X Shares)............................................ 98,980
Shareholder service fees payable (Y Shares)............................................ 3,830
12b-1 fees payable (X Shares).......................................................... 100,240
12b-1 fees payable (Y Shares).......................................................... 11,489
Custodian and fund accounting fees payable............................................. 146,903
Transfer agent fees payable............................................................ 27,764
Other accrued expenses................................................................. 491,654
--------------
Total Liabilities.................................................................. 2,356,242,471
--------------
NET ASSETS............................................................................. $7,971,534,053
==============
Net Assets:
Pacific Horizon Shares................................................................. $2,257,973,852
Horizon Shares......................................................................... 2,021,874,087
Horizon Service Shares................................................................. 3,129,562,849
S Shares............................................................................... 118,539,347
Y Shares............................................................................... 36,737,587
X Shares............................................................................... 406,846,331
--------------
Total.............................................................................. $7,971,534,053
==============
Shares Outstanding ($0.001 par value, 120 billion):
Pacific Horizon Shares.............................................................. 2,258,185,450
Horizon Shares...................................................................... 2,022,168,081
Horizon Service Shares.............................................................. 3,129,427,668
S Shares............................................................................ 118,538,233
Y Shares............................................................................ 36,737,583
X Shares............................................................................ 406,811,237
--------------
Total.............................................................................. 7,971,868,252
==============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE........................ $1.00
===
COMPOSITION OF NET ASSETS:
Shares of common stock, at par......................................................... $ 7,971,868
Additional paid-in capital............................................................. 7,963,495,319
Accumulated undistributed net investment income........................................ 3,514,158
Accumulated net realized losses on investment transactions............................. (3,447,292)
--------------
NET ASSETS, AUGUST 31, 1997............................................................ $7,971,534,053
==============
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 199
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $209,184,808
------------
EXPENSES:
Investment advisory fees............................................. 3,360,652
Administration fees.................................................. 3,679,805
Special management fees (Pacific Horizon Shares)..................... 3,625,502
Shareholder service fees (Horizon Service Shares).................... 3,857,672
Shareholder service fees (S Shares).................................. 53,805
Shareholder service fees (X Shares).................................. 375,826
Shareholder service fees (Y Shares).................................. 3,907
12b-1 fees (S Shares)................................................ 16,388
12b-1 fees (X Shares)................................................ 450,991
12b-1 fees (Y Shares)................................................ 11,722
Custodian and fund accounting fees................................... 380,182
Transfer Agent fees.................................................. 162,342
Legal fees........................................................... 295,692
Other expenses....................................................... 683,860
------------
Total Expenses................................................. 16,958,346
Less: Fee waivers.................................................... --
Expenses paid by third parties......................................... --
------------
Total Net Expenses..................................................... 16,958,346
------------
NET INVESTMENT INCOME.................................................. 192,226,462
------------
NET REALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions........................ 22,846
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $192,249,308
============
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 200
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
---------------- ----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................................. $ 192,226,462 $ 313,627,480
Net realized gains on investment transactions......................... 22,846 172,885
---------------- ----------------
Change in net assets resulting from operations........................ 192,249,308 313,800,365
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Pacific Horizon Shares................................................ (57,653,267) (110,595,534)
Horizon Shares........................................................ (46,310,824) (79,709,197)
Horizon Service Shares................................................ (79,626,947) (119,808,778)
S Shares.............................................................. (629,524)(b) --
Y Shares.............................................................. (70,391)(c) --
X Shares.............................................................. (7,329,789) (2,322,836)(a)
---------------- ----------------
Change in net assets from shareholder distributions.................... (191,620,742) (312,436,345)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares Issued........................................... 24,957,660,701 42,442,585,809
Dividends reinvested.................................................. 89,864,407 177,262,119
Cost of shares redeemed............................................... (24,227,328,843) (40,881,572,699)
---------------- ----------------
Change in net assets from capital share transactions................... 820,196,265 1,738,275,229
---------------- ----------------
Change in net assets................................................... 820,824,831 1,739,639,249
NET ASSETS
Beginning of Period................................................... 7,150,709,222 5,411,069,973
---------------- ----------------
End of Period......................................................... $ 7,971,534,053 $ 7,150,709,222
================ ================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
See Notes to Financial Statements.
15
<PAGE> 201
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. On August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Prime Fund (the
"Prime Fund").
The Prime Fund issues six classes of shares (Pacific Horizon Shares, Horizon
Shares, Horizon Services Shares, effective July 22, 1996, X Shares, S Shares
effective April 7, 1997 and effective July 10, 1997, Y Shares). Pacific Horizon
Shares have a Special Management Services Agreement/Plan while the Horizon
Service Shares have a Shareholder Services Plan. X, S and Y Shares each have a
Distribution and Services Plan.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Fund's administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Fund, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Fund's prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and
16
<PAGE> 202
distribution calculation services for the Fund. The Fund bears all fees and
expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the Fund.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Fund's transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund 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 estimates.
PORTFOLIO VALUATIONS:
The securities of the Prime Fund 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 Fund 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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Prime Fund records security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses from security transactions are recorded on an
identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of the fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
REPURCHASE AGREEMENT:
The Prime Fund'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, exceeds the repurchase
17
<PAGE> 203
price. In the event of the seller's default of the obligation to repurchase, the
Prime Fund 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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Prime Fund's net investment income is declared as a dividend daily, and
paid monthly, to shareholders of record at the close of business on record date.
Net realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains can be offset by
capital loss carryovers, such gains will not be distributed. Dividends and
distributions are recorded by the Prime Fund on the ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
------------- --------------
<S> <C> <C>
Prime Fund $ 2,742 $182,342
</TABLE>
FEDERAL INCOME TAXES:
It is the Prime Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute timely, all of its net investment company taxable income and net
capital gains to shareholders. Therefore, no federal income tax provision is
required.
At February 28, 1997, the Prime Fund had the following capital loss
carryovers:
<TABLE>
<CAPTION>
CAPITAL
LOSS EXPIRATION
FUND CARRYOVER DATE
- ---------------------- ---------- ----------
<S> <C> <C>
Prime Fund $ 744,962 2002
2,725,176 2003
----------
$3,470,138
==========
</TABLE>
To the extent that these carryovers are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders.
Addition-
18
<PAGE> 204
ally, during the year, the Prime Fund utilized $172,885 of its available capital
loss carryover to offset realized capital gains for Federal income tax purposes.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Prime Fund has an Investment Advisory Agreement with Bank of America.
For the six months ended August 31, 1997, the Fund had an Administration
Agreement with BISYS. Bank of America is entitled to a fee from the Prime Fund,
which is accrued daily and payable monthly, at an annual rate of 0.10% of each
Fund's first $3 billion of net assets, plus 0.09% of each Fund's next $2 billion
of net assets, plus 0.08% of each Fund's net assets in excess of $5 billion.
BISYS was entitled to a fee from the Prime Fund which is accrued daily and
payable monthly, at an annual rate of 0.10% of the Fund's first $7 billion of
net assets, plus 0.09% of the Fund's next $3 billion of net assets, plus 0.08%
of the Fund's net assets in excess of $10 billion.
The Prime Fund has entered into a Special Management Services Agreement (the
"Services Agreement") pursuant to which they agree to pay Bank of America and
BISYS 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 assets of the outstanding Pacific Horizon Shares of the Prime
Fund. Fees under the Services Agreement are borne solely by the Pacific Horizon
Shares.
Effective January 1997, the Services Agreement was terminated. The Prime
Fund has adopted a Special Management Services Plan (the "Services Plan")
pursuant to which Service Organizations agree to provide certain services to
their clients who are beneficial owners of Pacific Horizon Shares in return for
a payment by the Prime Fund of a fee at an annual rate 0.32% of the average
daily net assets of the outstanding Pacific Horizon Shares. Fees under the
Services Plan are borne solely by the Pacific Horizon Shares. Service
organizations include BISYS, Bank of America and its affiliates. For the six
months ended August 31, 1997, the Prime Fund was advised that BISYS, Bank of
America and their affiliates earned the following amounts pursuant to the
Services Agreement and Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES BISYS
------------------- -------------------
<S> <C>
$3,346,248 $22,110
</TABLE>
The Prime Fund has also adopted a Shareholder Services Plan (the "Horizon
Services 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 Prime Fund of a fee at an annual rate of 0.25% of the
average daily net assets of the Horizon Service Shares, which 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, 1997, the Prime Fund was advised that BISYS, Bank of America and its
affiliates earned
19
<PAGE> 205
the following amounts pursuant to the Horizon Services Plan:
BANK OF
AMERICA
AND
AFFILIATES
----------
$3,166,103
The Prime Fund has adopted the Distribution and Services Plan under which
the Prime Fund 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 Prime Fund's X Shares. For the six months ended August 31, 1997, the Prime
Fund was advised that Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Services Plan.
BANK OF
AMERICA
AND
AFFILIATES
----------
$374,472
The Prime Fund has adopted the Distribution and Services Plan under which
the Prime Fund pays the Distributor and Service Organization for the provision
of support service with respect to the beneficial owners of Y shares. Payments
for distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%; respectively, of the average daily net assets of
the Prime Fund's Y shares. For the period from July 10, 1997(date of inception)
to August 31, 1997, the Prime Fund was advised that Bank of America and its
affiliates earned the following amounts pursuant to the Distribution and
Services Plan.
BANK OF
AMERICA
AND
AFFILIATES
----------
$3,907
The Prime Fund has adopted the Distribution and Services Plan under which
the Fund pays the Distributor and Service Organization for the provision of
support services with respect to the beneficial owners of S shares. Payments for
the distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%, respectively, of the average daily net assets of
the Prime Fund's S shares. For the period from April 7, 1997(date of inception)
to August 31, 1997 the Fund was advised that Bank of America and its affiliates
earned $31,874 pursuant to the Distribution and Services Plan.
BISYS Ohio served the Prime Fund as transfer agent and dividend disbursing
agent. In these capacities, BISYS Ohio earned $162,342, for the six months ended
August 31, 1997.
For the six months ended August 31, 1997, the Prime Fund incurred legal
charges totaling $295,692, which were earned by a law firm, a partner of which
serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
20
<PAGE> 206
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 Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a Director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. A Director who dies or
resigns after nine years of service as a Director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. In addition, the amount
payable each year to a Director who dies or resigns shall be increased by $1,000
for each year of service that the Director served as Chairman of the Board. Each
Director may receive any benefits payable under the Retirement Plan, at his or
her election, either in one lump sum payment or ten annual installments. A
Director's years of service for the purpose of calculating the payments
described above shall be based upon service as a Director or Chairman after
February 28, 1994. Aggregate costs pursuant to the Retirement Plan amounted to
$15,064, for the Prime Fund, for the six months ended August 31, 1997.
21
<PAGE> 207
NOTE 5 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Prime Fund (at $1.00 per share) for the
periods indicated are summarized below:
<TABLE>
<CAPTION>
PRIME FUND
-----------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
----------------- ------------------
<S> <C> <C>
Pacific Horizon Shares
Issued.................................. 1,421,450,092 4,320,031,345
Reinvest................................ 44,139,878 99,202,915
Redeemed................................ (1,500,161,348) (4,326,928,364)
------------- -------------
Net increase/ (decrease).................. (34,571,378) 92,305,896
============= =============
Horizon Shares
Issued.................................. 9,219,317,384 15,114,015,999
Reinvest................................ 13,412,109 25,723,399
Redeemed................................ (8,920,510,978) (15,081,065,299)
------------- -------------
Net increase/ (decrease).................. 312,218,515 58,674,099
============= =============
Horizon Service Shares
Issued.................................. 13,634,158,320 22,771,276,975
Reinvest.............................. 26,468,915 50,011,411
Redeemed.............................. (13,476,384,289) (21,437,775,542)
------------- -------------
Net increase/
(decrease).............................. 184,242,946 1,383,512,844
============= =============
X Shares
Issued.................................. 518,517,302 237,259,971
Reinvest................................ 5,573,041 2,324,394
Redeemed................................ (321,059,977) (35,803,494)
------------- -------------
Net increase.............................. 203,030,366 203,780,871(a)
============= =============
S Shares
Issued.................................. 122,180,115 --
Reinvest................................ 270,464 --
Redeemed................................ (3,912,346) --
------------- -------------
Net increase.............................. 118,538,233(b) --
============= =============
Y Shares
Issued.................................. 42,037,008 --
Reinvest................................ -- --
Redeemed................................ (5,299,425) --
------------- -------------
Net increase.............................. 36,737,583(c) --
============= =============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
22
<PAGE> 208
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income............. 0.0258 0.0492 0.0539 0.0424 0.0287 0.0340
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------ ------ ------ ------ ------ ------
Total income from investment
operations........................ 0.0258 0.0492 0.0543 0.0197 0.0271 0.0340
Less dividends to shareholders from
net investment income............. (0.0257) (0.0490) (0.0539) (0.0422) (0.0287) (0.0341)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------ ------ ------ ------ ------ ------
Net change in net asset value per
share............................. 0.0001 0.0002 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 $ 1.00
====== ====== ====== ====== ====== ======
Total return....................... 2.59%(d) 5.01% 5.53% 4.30%+ 2.91% 3.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)........................ $ 2,258 $ 2,292 $ 2,200 $ 1,129 $ 1,216 $ 992
Ratio of expenses to average net
assets............................ 0.55%(c) 0.55% 0.55% 0.51% 0.52% 0.55%
Ratio of net investment income to
average net assets................ 5.11%(c) 4.92% 5.37% 4.19% 2.86% 3.42%
Ratio of expenses to average net
assets*........................... (b) (b) 0.56% 0.56% 0.53% (a)
Ratio of net investment income to
average net assets*............... (b) (b) 5.36% 4.14% 2.85% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total
return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
23
<PAGE> 209
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0273 0.0524 0.0571 0.0461 0.0319 0.0372
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0232) (0.0016) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0273 0.0524 0.0575 0.0229 0.0303 0.0372
Less dividends to shareholders from
net investment income............. (0.0273) (0.0522) (0.0571) (0.0454) (0.0319) (0.0372)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- 0.0002 0.0004 0.0008 (0.0016) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.76%(d) 5.34% 5.86% 4.63%+ 3.24% 3.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 2,022 $ 1,710 $ 1,651 $ 662 $ 3,840 $ 10,301
Ratio of expenses to average net
assets.......................... 0.23%(c) 0.23% 0.23% 0.16% 0.20% 0.23%
Ratio of net investment income to
average net assets.............. 5.43%(c) 5.24% 5.69% 4.11% 3.19% 3.59%
Ratio of expenses to average net
assets*......................... (b) (b) 0.24% 0.23% 0.21% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.68% 4.04% 3.18% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
24
<PAGE> 210
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0261 0.0499 0.0546 0.0431 0.0294 0.0345
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0261 0.0499 0.0550 0.0204 0.0278 0.0345
Less dividends to shareholders from
net
investment income.................. (0.0260) (0.0497) (0.0546) (0.0429) (0.0294) (0.0347)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. 0.0001 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 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.63%(d) 5.08% 5.60% 4.37%+ 2.98% 3.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 3,130 $ 2,945 $ 1,561 $ 864 $ 839 $ 793
Ratio of expenses to average net
assets.......................... 0.48%(c) 0.48% 0.48% 0.44% 0.45% 0.48%
Ratio of net investment income to
average net assets.............. 5.18%(c) 5.00% 5.44% 4.31% 2.94% 3.49%
Ratio of expenses to average net
assets*......................... (b) (b) 0.49% 0.48% 0.46% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.43% 4.27% 2.93% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
25
<PAGE> 211
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income.............................. 0.0245 0.0282
Net realized gains/(losses) on investment
transactions..................................... -- --
-------- --------
Total income from investment operations.............. 0.0245 0.0282
Less dividends to shareholders from net investment
income............................................. (0.0245) (0.0281)
-------- --------
Net change in net asset value per share.............. -- 0.0001
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 1.00 $ 1.00
======== ========
Total return......................................... 2.48%(d) 2.84%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............. $ 407 $ 204
Ratio of expenses to average net assets............ 0.78%(c) 0.78%(c)
Ratio of net investment income to average net
assets........................................... 4.90%(c) 4.73%(c)
Ratio of expenses to average net assets*........... (b) (b)
Ratio of net investment income to average net
assets*.......................................... (b) (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
26
<PAGE> 212
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0197
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0197
Less dividends to shareholders from net investment
income................................................. (0.0197)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 119
Ratio of expenses to average net assets................ 0.78%(c)
Ratio of net investment income to average net assets... 4.94%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from April 7, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
27
<PAGE> 213
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
Y SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0065
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0065
Less dividends to shareholders from net investment
income................................................. (0.0065)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 37
Ratio of expenses to average net assets................ 1.23%(c)
Ratio of net investment income to average net assets... 4.50%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 10, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
28
<PAGE> 214
PACIFIC HORIZON TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ---------- ---------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 104.2%
ALABAMA -- 0.8%
Mobile, Port City Medical Clinic
(LOC -- Rabobank Nederland)... VMIG1/Aaa A1+/AAA 3.70% 10/16/97 $ 4,900,000 $ 4,900,000
------------
ALASKA -- 0.4%
Valdez Term Revenue, Arco,
Series 94A.................... VMIG1/A2 A1/A 3.65% 10/24/97 2,400,000 2,400,000
------------
ARIZONA -- 2.8%
Apache County Industrial
Development, Tucson Electric
Power (LOC -- Chase Manhattan
Bank) (final maturity
6/15/20)*..................... VMIG1/A2 A1/A+ 3.35% 09/03/97 7,800,000 7,800,000
Apache County Industrial
Development, Tuscon Electric
Power,Series 83-A (LOC --
Barclays Bank)(final maturity
12/15/18)*.................... VMIG1/AA A1+/AA 3.35% 09/03/97 10,500,000 10,500,000
------------
18,300,000
------------
ARKANSAS -- 1.7%
Arkansas State Development
Authority (final maturity
1/1/19)*...................... NR/NR A1+/AAA 3.95% 09/03/97 10,860,000 10,860,000
------------
CALIFORNIA -- 5.7%
California Statewide Community
Development, Series A2 (final
maturity 5/15/25)*............ NR/NR A1+/AAA 3.05% 09/03/97 15,800,000 15,800,000
California Health Facilities
Financing Authority, Series B
(LOC -- Morgan Guaranty Trust)
(final maturity 3/1/20)*...... VMIG1/Aa1 A1+/AAA 3.40% 09/02/97 5,400,000 5,400,000
Los Angeles County Public Works,
Series A (MBIA insured)....... AAA/NR AAA/NR 4.50% 09/01/97 4,600,000 4,600,000
Newport Beach, Hoag Memorial
Presbyterian Hospital, (final
maturity 10/1/22)*............ VMIG1/A1 A1+/AA 3.40% 09/02/97 7,100,000 7,100,000
Redlands Certificates of
Participation (FGIC insured)
(final maturity 9/1/17)*...... VMIG1/AAA A1+/AAA 3.05% 09/03/97 105,000 105,000
Rocklin Unified School District
(FGIC insured)................ NR/NR SP1+/NR 4.45% 09/04/97 3,700,000 3,700,152
------------
36,705,152
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
29
<PAGE> 215
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
COLORADO -- 3.4%
Colorado Health Facilities
Authority, Sisters of Charity
Health Care System (LOC --
Toronto Dominion) (final
maturity 5/15/25)*............ VMIG1/Aa2 A1+/AA 3.35% 09/04/97 $ 1,700,000 $ 1,700,000
Colorado State Tax & Revenue
Anticipation Notes, Series A.. NR/NR SP1+/NR 4.50% 06/26/98 20,000,000 20,102,147
------------
21,802,147
------------
DELAWARE -- 0.6%
Delaware Economic Development
(final maturity 12/1/15)*..... VMIG1/Aaa A1+/AAA 3.40% 09/03/97 4,000,000 4,000,000
------------
DISTRICT OF COLUMBIA -- 5.0%
District of Columbia, Series A2
(LOC -- Canadian Imperial
Bank) (final maturity
10/1/07)*..................... VMIG1/Aa3 A1+/AA- 3.80% 09/02/97 13,300,000 13,300,000
District of Columbia, Series A3
(LOC -- Societe Generale)
(final maturity 10/1/07)*..... VMIG1/Aa3 A1+/AA+ 3.80% 09/02/97 11,000,000 11,000,000
District of Columbia, Series A5
(LOC -- Bank of Nova Scotia)
(final maturity 10/1/07)*..... VMIG1/Aa3 A1+/AA- 3.80% 09/02/97 7,800,000 7,800,000
------------
32,100,000
------------
FLORIDA -- 10.8%
Florida Board of Education
(final maturity 6/1/23)*...... NR/Aa A1+/AA 3.70% 12/01/97 9,900,000 9,900,000
Jacksonville Hospital, Baptist
Medical Center (LOC -- First
Union National Bank) (final
maturity 6/1/09)*............. VMIG1/NR A1/A+ 3.35% 09/04/97 7,000,000 7,000,000
Jacksonville Electric
Authority..................... P1/NR A1+/NR 3.60% 10/16/97 5,000,000 5,000,000
Jacksonville Pollution Control,
Florida Power & Light......... VMIG1/A2 A1/A 3.80% 10/23/97 3,000,000 3,000,000
Jacksonville Pollution Control,
Florida Power & Light......... VMIG1/A2 A1/A 3.70% 10/28/97 4,800,000 4,800,000
Lakeland Electric & Water
Revenue (FGIC insured)........ AAA/NR AAA/NR 5.25% 10/01/97 5,140,000 5,146,321
Lucie County, Florida Power &
Light......................... VMIG1/Aa3 A1+/AA 3.80% 10/22/97 9,850,000 9,850,000
Miami Health Facilities, Cedars
Medical Center, Series A
(final maturity 10/1/17)*..... NR/NR NR/NR 8.38% 10/01/97 1,000,000 1,005,690
Pasco County School Board (AMBAC
insured) (final maturity
8/1/26)*...................... VMIG1/AAA A1+/AAA 3.30% 09/04/97 7,000,000 7,000,000
Pinellas County Multi-Family
Housing, Foxbridge Apartments,
Series A (final maturity
6/15/25)*..................... NR/NR A1+/AAA 3.35% 09/03/97 5,000,000 5,000,000
Sarasota County, Hospital
District (Sarasota Hospital)
(LOC -- Suntrust bank)........ P1/Aa3 A1-/AA- 3.80% 11/18/97 5,000,000 5,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
30
<PAGE> 216
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA -- (CONTINUED)
Sunshine State (LOC -- National
Westminster-Morgan Guaranty
Trust)........................ VMIG1/Aa2 NR/NR 3.60% 10/16/97 $ 7,500,000 $ 7,500,000
------------
70,202,011
------------
GEORGIA -- 2.4%
Burke County Development
Authority Pollution Control,
Oglethorpe Power Corp., Series
A (FGIC insured) (final
maturity 1/1/19)*............. VMIG1/AAA A1+/AAA 3.25% 09/03/97 3,000,000 3,000,000
Georgia Municipal Gas Authority
(LOC -- Morgan Guaranty Trust)
(final maturity 11/1/06)*..... NR/NR A1+/AA 3.30% 09/03/97 7,800,000 7,800,000
Roswell Housing Authority (final
maturity 8/1/30)*............. NR/NR A1+/AAA 3.35% 09/03/97 5,000,000 5,000,000
------------
15,800,000
------------
IDAHO -- 0.9%
Idaho State Tax Anticipation
Notes......................... MIG1/NR SP1+/NR 4.63% 06/30/98 6,000,000 6,035,593
------------
ILLINOIS -- 9.2%
Chicago Tender Notes (LOC --
Morgan Guaranty Trust) (final
maturity 1/31/99)**........... MIG1/VMIG1 A1+/Spl+ 3.65% 02/05/98 15,000,000 15,000,000
Franklin Park (final maturity
7/1/22)* (AMBAC insured)...... NR/NR A1+/AAA 3.40% 09/04/97 7,055,000 7,055,000
Illinois Health Facilities,
Elmhurst Memorial Hospital,
Series B (LOC -- Rabobank)
(final maturity 1/1/20)*...... VMIG1/A1 NR/NR 3.70% 09/02/97 15,285,000 15,285,000
Illinois Health Facilities,
Resurrection Health Care
(final maturity 5/1/11)*...... VMIG1/A2 NR/NR 3.60% 09/02/97 17,000,000 17,000,000
Illinois Health Facilities,
Franciscan Sisters Health
(final maturity 1/1/18)*...... VMIG1/A2 NR/NR 3.70% 09/02/97 4,950,000 4,950,000
------------
59,290,000
------------
INDIANA -- 1.2%
Jasper County Pollution Control
Revenue....................... VMIG1/A2 A1/A 3.80% 10/15/97 8,000,000 8,000,000
------------
IOWA -- 0.7%
Iowa Higher Education Loan
Authority, Private College
(MBIA insured) (final maturity
12/1/15)*..................... VMIG1/Aaa A1+/AAA 3.35% 09/03/97 4,700,000 4,700,000
------------
KANSAS -- 0.4%
Wamego Pollution Control
(LOC -- Credit Suisse-First
Boston) (final maturity
3/1/26)*...................... P1/Aa3 A1+/AA 3.35% 09/03/97 2,600,000 2,600,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
31
<PAGE> 217
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
KENTUCKY -- 2.4%
Kentucky Asset/Liability Tax &
Revenue Anticipation Notes,
Series A...................... MIG1/NR SP1+/NR 4.50% 06/25/98 $10,000,000 $ 10,050,914
Kentucky Economic Development,
Sisters of Charity (final
maturity 11/1/20)*............ VMIG1/A1 A1/A+ 3.65% 09/02/97 5,600,000 5,600,000
------------
15,650,914
------------
LOUISIANA -- 3.3%
Ascension Parish, Borden Inc.
Project (LOC -- Credit Suisse)
(final maturity 12/1/09)*..... VMIG1/Aa2 A1+/AA 3.30% 09/03/97 5,500,000 5,500,000
Louisiana State General
Obligation Bonds, Tax Exempt
Eagle Trust, Series 1994
(AMBAC insured) (final
maturity 5/1/09)*............. NR/NR A1/AA 3.46% 09/04/97 11,600,000 11,600,000
Plaquemines Port Harbor & Term
District, Chevron Pipe Line
Company (final maturity
9/1/08)*...................... P1/Aa3 AA/NR 4.05% 03/01/98 4,000,000 4,000,000
------------
21,100,000
------------
MARYLAND -- 0.3%
Baltimore Industrial Development
(LOC -- Wachovia Bank) (final
maturity 12/1/16)*............ P1/Aa2 NR/NR 3.40% 09/04/97 1,715,000 1,715,000
------------
MASSACHUSETTS -- 0.5%
Massachusetts Health and
Education Authority, Capital
Assets, Series D (MBIA
insured) (final maturity
1/1/35)*...................... VMIG1/AAA A1+/AAA 3.65% 09/02/97 3,000,000 3,000,000
------------
MICHIGAN -- 2.1%
Farmington Hills Hospital
Finance Authority, Botsford
General Hospital, Series B
(MBIA insured) (final maturity
2/15/16)*..................... VMIG1/Aaa A1/AAA 3.65% 09/02/97 3,800,000 3,800,000
Michigan Municipal Bond
Authority, Series 97-B........ NR/NR NR/SP1+ 4.50% 07/02/98 10,000,000 10,056,136
------------
13,856,136
------------
MINNESOTA -- 1.3%
Cohasset Revenue, Minnesota
Power & Light Co. (LOC -- ABN
AMRO Bank N.V.) (final
maturity 6/1/13)*............. NR/NR A1+/AA+ 3.70% 09/01/97 1,000,000 1,000,000
Duluth Tax Increment Revenue,
Lake Superior Paper (LOC --
Wachovia Bank) (final maturity
9/1/10)*...................... MIG1/Aa2 A1+/AA+ 3.35% 09/04/97 4,100,000 4,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
32
<PAGE> 218
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
MINNESOTA -- (CONTINUED)
St. Cloud Health Care Facilities
(final maturity 7/1/27)*
(LOC -- Rabobank Nederland)... P1/Aaa A1+/AAA 3.40% 09/04/97 $ 3,000,000 $ 3,000,000
------------
8,100,000
------------
MISSOURI -- 2.4%
Columbia Water & Electric,
Series B (LOC -- Toronto
Dominion Bank) (final maturity
12/1/15)*..................... VMIG1/Aa2 A1+/AA 3.30% 09/03/97 1,400,000 1,400,000
Missouri Health & Education, The
Washington University Project,
Series 96A (final maturity
9/1/30)*...................... VMIG1/Aa1 A1+/AA 3.75% 09/02/97 2,300,000 2,300,000
Missouri State Health &
Educational Authority, Series
B (MBIA insured) (final
maturity 6/1/22)*............. NR/AAA A1+/AAA 3.35% 09/03/97 2,000,000 2,000,000
Missouri State Infrastructure
Facilities, Midtown
Redevelopment Project
(LOC -- Dai-Ichi Kangyo, Los
Angeles) (final maturity
12/1/18)*..................... VMIG1/A1 NR/NR 3.60% 09/02/97 10,000,000 10,000,000
------------
15,700,000
------------
NEBRASKA -- 0.5%
Nebraska Educational Facilities
(FGIC insured) (final maturity
12/1/00)*..................... VMIG1/AAA A1/AAA 3.30% 09/03/97 3,435,000 3,435,000
------------
NEW MEXICO -- 1.4%
Albuquerque Gross Receipts,
Lodgers Tax Revenue (LOC --
Canadian Imperial Bank) (final
maturity 7/1/22)*............. Aa3/VMIG1 AA/A1+ 3.30% 09/03/97 1,200,000 1,200,000
New Mexico State Highway
Commission (FSA insured)
(final maturity 6/15/11)*..... VMIG1/Aaa A1+/AAA 3.30% 09/03/97 8,000,000 8,000,000
------------
9,200,000
------------
NEW YORK -- 4.6%
New York City Water & Sewer
Systems (final maturity
6/15/23)*..................... NR/NR A1+/AAA 3.45% 09/03/97 10,000,000 10,000,000
New York State Transportation
Authority (final maturity
4/1/10)*...................... VMIG1/AAA NR/NR 3.40% 09/03/97 9,900,000 9,900,000
New York State Energy Research &
Development, Pollution
Control, New York State
Electric & Gas Corp.
(LOC -- Morgan Guaranty)
(final maturity 6/1/29)*...... VMIG1/Aa1 A1+/AAA 3.65% 09/02/97 10,000,000 10,000,000
------------
29,900,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
33
<PAGE> 219
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA -- 7.8%
Charlotte Airport Revenue,
Series 93A (MBIA insured)
(final maturity 7/1/16)*...... VMIG1/Aaa A1+/AAA 3.25% 01/01/98 $10,280,000 $ 10,280,000
Lenoir County Hospital Revenue,
Lenoir Memorial Hospital
(LOC -- Wachovia Bank) (final
maturity 10/1/12)*............ VMIG1/AA2 NR/NR 3.40% 09/04/97 3,400,000 3,400,000
North Carolina Easton Municipal
Power (LOC -- Canadian
Imperial Bank of Commerce).... P1/Aa3 A1+/AA 3.55% 10/30/97 10,000,000 10,000,000
North Carolina Easton Municipal
Power (LOC -- Canadian
Imperial Bank of Commerce).... P1/Aa3 A1+/AA 3.70% 11/13/97 6,200,000 6,200,000
North Carolina Medical Care
Commission, Pooled Equipment
Financing Project, (MBIA
insured) (final maturity
12/1/25)*..................... VMIG1/AAA A2/AAA 3.55% 12/01/97 1,300,000 1,300,000
North Carolina Retirement
Community (LOC -- LaSalle
National Bank) (final maturity
11/15/09)*.................... NR/NR A1+/AA+ 3.38% 09/02/97 10,000,000 10,000,000
Wake County Pollution Control,
Carolina Power & Light Co.
Project, Series B (LOC --
Sumitomo Bank) (final maturity
9/1/15)*...................... VMIG1/A1+ NR/NR 3.45% 09/03/97 7,300,000 7,300,000
Wake County Pollution Control,
Carolina Power & Light Co.
Project, Series C (LOC --
Sumitomo Bank) (final maturity
10/1/15)*..................... P1/NR A1+/NR 3.45% 09/03/97 2,300,000 2,300,000
------------
50,780,000
------------
NORTH DAKOTA -- 0.5%
Grand Forks Hospital Facilities,
United Hospital (LOC --
LaSalle National Bank) (final
maturity 12/1/16)*............ VMIG1/A1 NR/NR 3.65% 09/02/97 3,340,000 3,340,000
------------
OHIO -- 0.4%
Hamilton County Hospital
Facilities Bethesda Hospital,
Inc. (LOC -- Rabobank
Nederland) (final maturity
2/15/24)*..................... VMIG1/Aaa A1+/AAA 3.20% 09/04/97 2,600,000 2,600,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
34
<PAGE> 220
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA -- 7.1%
Allegheny County Industrial
Development, Duquesne Light
Co., Series A (LOC -- Canadian
Imperial Bank of Commerce)
(final maturity 9/1/11)*...... NR/P1 AA-/A1+ 3.65% 10/30/97 $ 8,225,000 $ 8,225,000
Allegheny County Industrial
Development, Duquesne Light
Co., Series A (LOC -- Canadian
Imperial Bank of Commerce)
(final maturity 9/1/11)*...... NR/P1 AA-/A1+ 3.65% 10/30/97 3,700,000 3,700,000
Delaware Valley Finance
Authority (LOC -- Credit
Suisse) (final maturity
12/1/19)*..................... VMIG1/Aa3 A1+/AA 3.25% 09/02/97 3,000,000 3,000,000
Emmaus General Authority, Series
B (final maturity 3/1/24)*.... NR/NR NR/NR 3.35% 09/03/97 2,200,000 2,200,000
Quakertown General Authority,
Series A (LOC -- PNC Bank)
(final maturity 7/1/26)*...... VMIG1/A1 NR/NR 3.45% 09/02/97 18,600,000 18,600,000
Quakertown Hospital Authority,
HPS Group Pooled Financing
(LOC -- PNC Bank) (final
maturity 7/1/05)*............. VMIG1/A1 NR/NR 3.45% 09/02/97 10,000,000 10,000,000
------------
45,725,000
------------
RHODE ISLAND -- 0.7%
Rhode Island Housing, Series
22-A (FGIC insured) (final
maturity 4/1/27)*............. VMIG1/AA2 A1+/AA+ 3.65% 12/02/97 4,615,000 4,615,000
------------
SOUTH CAROLINA -- 3.1%
South Carolina Public Service
Authority..................... P1/Aa A1/AA- 3.80% 10/22/97 10,000,000 10,000,000
South Carolina Public Service
Authority..................... P1/Aa A1/AA- 3.65% 11/20/97 10,000,000 10,000,000
------------
20,000,000
------------
TENNESSEE -- 6.0%
Bristol Health & Education
Facilities, Series 95A (final
maturity 3/1/14)* (FGIC
insured)...................... NR/NR A1/AAA 3.45% 09/03/97 8,500,000 8,500,000
Johnson City (final maturity
5/1/21)* (FGIC insured)....... NR/NR A1+/AAA 3.50% 09/03/97 9,775,000 9,775,000
Metropolitan Government
Nashville & Davidson County
Health & Education Facilities,
Adventist/Sunbelt, Series A
(LOC -- Suntrust Bank) (final
maturity 11/15/26)*........... VMIG1/Aa3 A1+/AA- 3.38% 09/04/97 9,500,000 9,500,000
Shelby County General Obligation
(FSA insured) (final maturity
11/1/21)*..................... NR/NR A1+/AAA 3.40% 09/04/97 11,200,000 11,200,000
------------
38,975,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
35
<PAGE> 221
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
TEXAS -- 7.6%
Bexar County Housing Authority
(final maturity 9/15/26)*..... NR/NR AAA/A1+ 3.35% 09/03/97 $ 3,275,000 $ 3,275,000
Brownsville Texas Utility System
(LOC -- Toronto Dominion)..... P1/Aa2 A1+/AA 3.80% 10/29/97 8,500,000 8,500,000
Grand Prairie, Housing Lincoln
Property Co. (final maturity
6/1/10)*...................... NR/NR A1+/AAA 3.40% 09/03/97 6,700,000 6,700,000
Gulf Coast Waste Disposal,
Pollution Control, Exxon
Project (final maturity
6/1/20)*...................... VMIG1/Aaa A1+/AAA 3.70% 09/03/97 2,100,000 2,100,000
Harris County Health Facilities,
Memorial Hospital (final
maturity 6/1/24)*............. VMIG1/Aaa A1+/AAA 3.25% 09/03/97 3,500,000 3,500,000
North Texas Water District
(AMBAC insured) (final
maturity 6/1/02)*............. NR/AAA NR/AAA 7.65% 06/01/98 2,280,000 2,357,694
Texas Department of Housing..... NR/NR A1+/NR 3.50% 09/17/97 8,450,000 8,450,000
Texas Department of Housing..... NR/NR A1+/NR 3.60% 09/17/97 1,060,000 1,060,000
Texas State Tax & Revenue
Anticipation Notes............ MIG1/NR SP1+/NR 4.75% 08/31/98 12,000,000 12,104,115
University of Texas............. P1/NR A1+/NR 3.65% 11/18/97 1,440,000 1,440,000
------------
49,486,809
------------
UTAH -- 3.6%
Intermountain Power Agency,
Power Supply Revenue
(LOC -- Swiss Bank) (final
maturity 7/1/14)*............. VMIG1/Aa1 A1+/AA+ 3.50% 09/15/97 5,500,000 5,500,000
Intermountain Power Agency,
Power Supply Revenue (final
maturity 7/1/03)*............. VMIG1/AAA NR/NR 3.45% 09/03/97 9,900,000 9,900,000
Utah State Housing Finance
Agency, Single Family, Series
4 (final maturity 1/1/28)*.... VMIG1/Aa1 NR/NR 3.45% 09/03/97 8,000,000 8,000,000
------------
23,400,000
------------
VERMONT -- 0.7%
Vermont Education & Health
Building, Middlebury College
(final maturity 5/1/28)*...... NR/Aa A1+/AA 3.95% 09/03/97 4,700,000 4,700,000
------------
WISCONSIN -- 1.0%
Carlton Pollution Control
Revenue, Wisconsin Power and
Light Co. (final maturity
9/01/05)*..................... VMIG1/Aa2 A1+/AA 3.60% 09/02/97 1,400,000 1,400,000
Wisconsin Transportation
(LOC -- Bayerische
Landesbank)................... P1/Aaa A1+/AAA 3.70% 11/05/97 5,105,000 5,105,000
------------
6,505,000
------------
WYOMING -- 0.9%
Sweetwater County Pollution
Control, Pacificorp 84
(LOC -- Deutsche Bank) (final
maturity 12/1/14)*............ P1/Aa1 A1+/AAA 3.60% 12/01/2014 2,500,000 2,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
36
<PAGE> 222
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
WYOMING -- (CONTINUED)
Uinta County Pollution Control,
Chevron Inc. Project (final
maturity 12/1/22)*............ P1/Aa2 NR/NR 3.80% 12/01/22 $ 3,400,000 $ 3,400,000
------------
5,900,000
------------
TOTAL INVESTMENTS (AMORTIZED COST
$675,378,762)(A) -- 104.2%...... 675,378,762
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (4.2%)................ (26,934,255)
------------
NET ASSETS -- 100.0%............. $648,444,507
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $648,444,507.
(a) Cost for federal income tax and financial reporting purposes is
substantially the same.
AMBAC -- AMBAC Indemnity Corporation.
FGIC -- Financial Guaranty Insurance Company.
FSA -- Financial Security Assurance.
LOC -- Letter of Credit.
MBIA -- Municipal Bond Insurance Association.
NR -- No rating assigned by Moody's or S&P.
*Variable rate security. Maturity date reflects the next rate change date.
**Security includes put feature. Maturity date reflects the next put date.
+The ratings provided consist of short-term and long-term ratings.
See Notes to Financial Statements.
37
<PAGE> 223
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 99.9%
CALIFORNIA -- 99.1%
California Counties Industrial
Development Authority (LOC --
California State Teachers
Retirement) (final maturity
9/1/08)*.......................... NR/NR A1+/AA+ 3.25% 09/01/97 $ 1,175,000 $ 1,175,000
California Department of Water..... P1/Aa A1+/AA 3.35% 09/11/97 2,039,000 2,039,000
California General Obligation...... P1/A A/A+ 3.65% 09/19/97 5,000,000 5,000,000
California General Obligation...... P1/A A/A+ 3.55% 10/30/97 10,750,000 10,750,000
California General Obligation...... P1/A A/A+ 3.60% 10/09/97 14,000,000 14,000,000
California General Obligation...... P1/A A/A+ 3.55% 10/09/97 2,500,000 2,500,000
California General Obligation
(final maturity 4/1/04)*.......... NR/NR A1+/AAA 3.70% 09/15/97 15,100,000 15,100,000
California General Obligation,
Class A (final maturity 2/1/06)*.. A1+/AA NR/NR 3.36% 09/04/97 10,000,000 10,000,000
California Health Facilities
Authority, Sutter Health, Series C
(FSA insured) (final maturity
7/1/22)*.......................... AAA/NR A1+/AAA 3.40% 09/02/97 1,800,000 1,800,000
California Health Facilities
Financing Authority, Children's
Hospital (MBIA insured) (final
maturity 11/1/21)*................ VMIG1/AAA A1+/AAA 3.00% 09/03/97 1,900,000 1,900,000
California Housing Agency, Multi-
Family Housing (final maturity
7/15/13)*......................... NR/NR A1+/AAA 3.00% 09/03/97 2,600,000 2,600,000
California Local Government Agency,
Certificates of Participation
(LOC -- Fuji Bank, Ltd.) (final
maturity 8/1/16)*................. VMIG1/A1 NR/NR 3.30% 09/03/97 3,200,000 3,200,000
California Pollution Control
Financing Authority, Atlantic
Richfield Project, Series A (AMT)
(final maturity 12/1/24)*......... VMIG1/A2 A1/A 3.55% 09/02/97 8,800,000 8,800,000
California Pollution Control
Financing Authority, Chevron USA,
Inc. Project, Callable 10/9/97@100
(final maturity 11/15/01)*........ AA2/NR AA/NR 3.90% 11/15/97 2,405,000 2,408,925
California Pollution Control
Financing Authority, Colmac Energy
Project, Series A (AMT)
(LOC -- Swiss Bank) (final
maturity 12/1/16)*................ NR/NR A1+/AA+ 3.00% 09/03/97 2,300,000 2,300,000
California Pollution Control
Financing Authority, Delano Power
Project (AMT) (LOC -- Algemene
Bank Nederland) (final maturity
8/1/19)*.......................... P1/Aa1 NR/NR 3.55% 09/02/97 5,100,000 5,100,000
California Pollution Control
Financing Authority, Delano
Project (final maturity 8/1/19)*.. P1/Aa1 NR/NR 3.55% 09/02/97 3,400,000 3,400,000
</TABLE>
- ---------------
See Notes to Financial Statements.
38
<PAGE> 224
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Pollution Control
Financing Authority, Dow Chemical
Project........................... P1/NR A1/NR 3.55% 10/09/97 $ 2,300,000 $ 2,300,000
California Pollution Control
Financing Authority, Equity
Stanislaus Project (LOC -- Swiss
Bank) (final maturity 12/1/17)*... VMIG1/AA1 A1+/AA+ 3.45% 09/02/97 1,600,000 1,600,000
California Pollution Control
Financing Authority, Honey Lake
Power Company Project (LOC --
Banque Nationale, Paris) (final
maturity 9/1/18)*................. P1/AA3 NR/NR 3.55% 09/02/97 5,300,000 5,300,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Banque Nationale,
Paris) (final maturity
11/1/26)*......................... NR/NR A1+/AA+ 3.50% 09/02/97 9,200,000 9,200,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Rabobank
Nederland) (final maturity
12/1/16)*......................... NR/NR A1+/AAA 3.10% 09/03/97 11,500,000 11,500,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Swiss Bank
Corporation) (final maturity
12/1/16)*......................... NR/NR A1+/AAA 3.05% 09/03/97 32,000,000 32,000,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Toronto Dominion
Bank) (final maturity 12/1/18)*... NR/NR A1+/AAA 3.50% 09/02/97 2,800,000 2,800,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (final maturity
2/1/16)*.......................... P1/A1 A1/A 3.50% 09/02/97 23,100,000 23,100,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric, Series D,
(LOC -- UBS)...................... A1+/AA NR/NR 3.65% 10/21/97 15,000,000 15,000,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric, Series D,
(LOC -- UBS)...................... A1+/AA NR/NR 3.70% 10/23/97 5,000,000 5,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Martinez Project, Series A
(AMT) (final maturity 10/1/24)*... VMIG1/Aa1 NR/NR 3.45% 09/02/97 1,000,000 1,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Martinez Project, Series B
(AMT) (final maturity 10/1/31)*... VMIG1/AA1 A1+/AAA 3.05% 09/03/97 6,000,000 6,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Project (final maturity
10/1/11)*......................... VMIG1/AA1 A1+/AAA 3.40% 09/02/97 1,000,000 1,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
39
<PAGE> 225
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Pollution Control
Financing Authority, Solid Waste
Disposal Revenue Bond, Taorimina
Industries, Inc. (AMT)
(LOC -- Sanwa Bank, Los Angeles,
Sanwa Bank, Ltd.) (final maturity
8/1/14)*.......................... VMIG1/AA3 NR/NR 3.15% 09/03/97 $ 5,500,000 $ 5,500,000
California Pollution Control
Financing Authority, Solid Waste
Disposal Revenue Bond, Taormina
Industries, Series B (AMT)
(LOC -- Sanwa Bank, Los Angeles,
Sanwa Bank, Ltd.) (final maturity
8/1/14)*.......................... VMIG1/Aa3 NR/NR 3.15% 09/03/97 2,260,000 2,260,000
California Pollution Control
Financing Authority, Southern
California Edison................. F1/A1 A1/A+ 3.50% 11/19/97 14,000,000 14,000,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85C..... P1/A1 A1/A+ 3.60% 10/10/97 3,300,000 3,300,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85C..... P1/A1 A1/A+ 3.55% 10/16/97 2,000,000 2,000,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85D..... P1/A1 A1/A+ 3.50% 11/20/97 6,200,000 6,200,000
California School Cash Reserve
Program, Series A................. MIG1/NR SP1+/NR 4.75% 07/02/98 30,000,000 30,216,381
California State................... P1/P2 A1/A+ 3.60% 10/23/97 2,700,000 2,700,000
California State Department of
Water (final maturity 12/1/29)*... NR/AA A+/AA 3.31% 09/04/97 8,300,000 8,300,000
California State Municipal Receipts
(AMBAC insured) (final maturity
6/1/21)*.......................... A1+/AAA A1+/AAA 3.40% 09/03/97 15,950,000 15,950,000
California State Municipal Receipts
(FGIC insured) (final maturity
8/1/19)*.......................... A1+/AAA A1+/AAA 3.30% 09/04/97 7,175,000 7,175,000
California State Municipal Receipts
(FGIC insured) (final maturity
9/1/21)*.......................... A1+/AAA A1+/AAA 3.30% 09/03/97 3,875,000 3,875,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-1
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 2,000,000 2,000,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-2
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 9,200,000 9,200,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-7
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 2,800,000 2,800,000
California Statewide Community
Development Authority, Calsonic
Project (LOC -- Union Bank of
California) (final maturity
8/1/08)*.......................... F1+/AA- NR/NR 3.40% 09/03/97 7,000,000 7,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
40
<PAGE> 226
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Statewide Community
Development Authority,
Certificates of Participation
(LOC -- Dresdner Bank) (final
maturity 6/1/26)*................. VMIG1/AA1 NR/NR 3.40% 09/02/97 $12,600,000 $ 12,600,000
California Statewide Community
Development Authority, Contech
Construction Project (LOC -- Bank
of Tokyo) (final maturity
5/1/09)*.......................... NR/NR A1+/AA+ 3.25% 09/03/97 1,440,000 1,440,000
California Statewide Community
Development Authority, Chevron
USA, Inc. Project (final maturity
12/15/24)*........................ P1/Aa2 NR/NR 3.50% 09/02/97 3,200,000 3,200,000
Chula Vista Industrial Development,
San Diego Gas & Electric Company,
Series B (AMT) (final maturity
12/1/27)*......................... VMIG1/A1 A1/A+ 3.15% 09/03/97 11,000,000 11,000,000
Chula Vista Multi-Family Housing,
Terra Nova Project, Series A
(LOC -- Industrial Bank of Japan)
(final maturity 3/1/05)*.......... NR/NR A1/A 3.20% 09/03/97 5,000,000 5,000,000
Chula Vista, San Diego Gas &
Electric, Series 92C (AMT)........ P1/A1 A1/A+ 3.75% 10/23/97 3,000,000 3,000,000
Contra Costa County Multi-Family
Housing, Park Regency, Series A
(final maturity 8/1/32)*.......... NR/NR A1+/A 3.20% 09/03/97 8,000,000 8,000,000
Contra Costa County Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 07/01/98 10,000,000 10,053,544
Foothill Eastern Toll Road, Series
B (LOC -- Morgan Guaranty Trust)
(final maturity 1/2/35)*.......... NR/NR A1+/AAA 3.10% 09/04/97 13,500,000 13,500,000
Foothill Eastern Toll Road, Series
D (LOC -- Industrial Bank of
Japan) (final maturity 1/2/35)*... A1/A F1+/AA 3.00% 09/04/97 6,300,000 6,300,000
Foothill Eastern Toll Road, Series
E (LOC -- Banque Nationale, Paris)
(final maturity 1/2/35)*.......... NR/NR A1+/A+ 3.00% 09/04/97 5,000,000 5,000,000
Fremont Certificates of
Participation,Building & Equipment
Financing Project (LOC -- Sumitomo
Bank, Ltd.) (final maturity
7/1/15)*.......................... NR/NR A1/A 3.20% 09/04/97 4,125,000 4,125,000
Fremont Certificates of
Participation (LOC -- Sumitomo
Bank, Ltd.) (final maturity
8/1/22)*.......................... NR/NR A1/A 3.20% 09/04/97 3,100,000 3,100,000
Fremont Multi-Family Housing
Authority, Mission Wells Project
(LOC -- Industrial Bank of Japan)
(final maturity 9/1/07)*.......... NR/NR A1/A 3.20% 09/04/97 6,700,000 6,700,000
Fremont School District, Alameda
County (final maturity 8/1/20)*... NR/NR A1+/AAA 3.35% 09/04/97 6,150,000 6,150,000
Grand Terrace Community
Redevelopment Agency, Mt. Vernon
Villas (LOC -- Industrial Bank of
Japan) (final maturity
12/1/11)*......................... NR/NR A1/A 3.40% 09/03/97 1,650,000 1,650,000
</TABLE>
- ---------------
See Notes to Financial Statements.
41
<PAGE> 227
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Huntington Beach Multi-Family
Housing, Huntington Breakers,
Series A (LOC -- Sumitomo Bank,
Ltd.) (final maturity 7/1/14)*.... VMIG1/A1 NR/NR 3.20% 09/03/97 $10,300,000 $ 10,300,000
Indio Multi-Family Housing, Western
Federal Savings Project
(LOC -- Wells Fargo & Co.) (final
maturity 6/1/05)*................. NR/NR A1/A+ 3.15% 09/04/97 2,950,000 2,950,000
Irvine Improvement Board Act 1915,
District 94-15 (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
9/2/20)*.......................... VMIG1/A1 A1/A 3.45% 09/02/97 4,733,000 4,733,000
Irvine Improvement Board Act 1915,
District 95-12, Series A (LOC --
Kredietbank N.V.) (final maturity
9/2/21)*.......................... VMIG1/AA2 A1+/AA- 3.40% 09/02/97 3,350,000 3,350,000
Irvine Ranch Water District
Certificates of Participation,
Capital Improvement Project
(LOC -- Toronto Dominion) (final
maturity 8/1/16)*................. VMIG1/AA2 NR/NR 3.40% 09/02/97 2,300,000 2,300,000
Irvine Ranch Water District
(LOC -- Landesbank Hessen) (final
maturity 10/1/10)*................ NR/NR A1+/AAA 3.40% 09/02/97 1,200,000 1,200,000
Long Beach Health Services,
Memorial Health Service (final
maturity 10/1/16)*................ VMIG1/A1 A1+/AA- 3.00% 09/03/97 9,200,000 9,200,000
Los Angeles Community Redevelopment
Agency, Academy Village Apartments
(LOC -- Swiss Bank) (final
maturity 10/1/19)*................ VMIG1/AA1 NR/NR 3.15% 09/02/97 15,000,000 15,000,000
Los Angeles Community Redevelopment
Agency, Grand Promenade Project
(LOC -- Tokai Bank, Ltd.) (final
maturity 12/1/10)*................ NR/NR A1+/AAA 3.05% 09/02/97 14,900,000 14,900,000
Los Angeles County (AMT)
(LOC -- National Westminster Bank,
PLC).............................. P1/A1+ NR/NR 3.80% 09/11/97 15,000,000 15,000,000
Los Angeles County (AMT)
(LOC -- National Westminster Bank,
PLC).............................. P1/A1+ NR/NR 3.70% 09/11/97 6,000,000 6,000,000
Los Angeles County, Capital Asset
Lease Corp. (LOC -- Morgan
Guaranty Trust)................... P1/A1+ NR/NR 3.75% 10/22/97 10,000,000 10,000,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB1 (FSA insured) (final maturity
7/1/25)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 3,500,000 3,500,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB2(FSA insured) (final maturity
7/1/21)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 23,000,000 23,000,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB3(FSA insured) (final maturity
7/1/16)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 5,400,000 5,400,000
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 228
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles County Metropolitan
Transportation Authority, Series
SG-54 (AMBAC insured) (final
maturity 7/1/17)*................. NR/NR A1+/AAA 3.45% 09/03/97 $ 2,100,000 $ 2,100,000
Los Angeles County Multi-Family
Housing, Channel Gateway
Apartments (LOC -- Fuji Bank,
Ltd.) (final maturity 8/1/19)*.... VMIG1/A1 NR/NR 3.90% 09/04/97 6,700,000 6,700,000
Los Angeles County Multi-Family
Housing, Sandi Canyon Villas (AMT)
(LOC -- Industrial Bank of Japan)
(final maturity 11/1/09)*......... VMIG1/A2 NR/NR 3.45% 09/03/97 2,000,000 2,000,000
Los Angeles County Multi-Family
Housing, Studio Colony (LOC --
Industrial Bank of Japan) (final
maturity 5/16/07)*................ VMIG1/A2 NR/NR 3.20% 09/04/97 2,100,000 2,100,000
Los Angeles County Public Water
Financing Authority, Series A
(MBIA insured).................... AAA/NR AAA/NR 4.50% 09/01/97 5,000,000 5,000,000
Los Angeles County Sales Tax
Revenue, Series A (FGIC insured)
(final maturity 7/1/12)*.......... VMIG1/AAA A1/NR 09/03/97 1,400,000 1,400,000
Los Angeles County, Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 06/30/98 15,000,000 15,077,657
Los Angeles County Metropolitan
Transportation Authority (LOC --
National Westminster Bank, PLC)... P1/A1+ NR/NR 3.45% 09/25/97 6,000,000 6,000,000
Los Angeles County Wastewater
Project (LOC -- Morgan Guaranty
Trust)............................ P1/A1+ NR/NR 3.50% 09/05/97 15,000,000 15,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.75% 10/09/97 9,000,000 9,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.70% 10/09/97 10,000,000 10,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.90% 10/15/97 10,000,000 10,000,000
Los Angeles Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 06/30/98 15,000,000 15,071,559
Los Angeles Unified School
District, Tax & Revenue
Anticipation Notes, Series B...... MIG1/NR SP1+/NR 4.50% 09/30/97 8,500,000 8,505,597
Marin County CA Tax & Revenue
Anticipation Notes................ MIG1/NR NR/NR 4.50% 07/31/98 20,000,000 20,114,442
Modesto Irrigation District........ VMIG1/A A/NR 3.60% 10/15/97 3,000,000 3,000,000
Modesto Irrigation District,
Certificates of Participation..... VMIG1/A A1/NR 3.50% 10/20/97 5,000,000 5,000,000
Modesto Multi-Family Housing, Live
Oaks Apartments Project (final
maturity 9/1/24)*................. NR/NR A1+/AAA 3.05% 09/03/97 1,400,000 1,400,000
Monterey County Financing
Authority, Reclamation and
Distribution Project (LOC -- Dai-
Ichi Kangyo, Los Angeles) (final
maturity 9/1/36)*................. VMIG1/A1 NR/NR 3.25% 09/04/97 6,100,000 6,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 229
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Monterey Peninsula Water Management
District, Wastewater Reclamation
Project (LOC -- Sumitomo Bank,
Ltd.) (final maturity 7/1/22)*.... VMIG1/A1 A1/A 3.20% 09/04/97 $16,300,000 $ 16,300,000
Newport Beach, Hoag Memorial
Hospital (final maturity
10/1/22)*......................... VMIG1/A1 A1+/AA 3.40% 09/02/97 20,090,000 20,090,000
Newport Beach, Hoag Memorial
Hospital, Series A (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 13,400,000 13,400,000
Newport Beach, Hoag Memorial
Hospital, Series B (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 1,600,000 1,600,000
Newport Beach, Hoag Memorial
Hospital, Series C (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 22,800,000 22,800,000
Oakland, Children's Hospital
Medical Center, Series B (LOC --
Banque Nationale, Paris) (final
maturity 7/1/99)*................. NR/NR A1/A+ 3.00% 09/03/97 3,100,000 3,100,000
Orange County, Pointe Niguel
Project, Series C (LOC -- First
Interstate Bancorp) (final
maturity 11/1/05)*................ VMIG1/AA3 NR/NR 3.35% 09/04/97 13,000,000 13,000,000
Orange County Housing Authority,
Costa Partner Development, Series
BB (LOC -- Chase/Chemical Bank)
(final maturity 12/1/09)*......... VMIG1/Aa2 NR/NR 3.05% 09/02/97 12,200,000 12,200,000
Orange County Sanitation,
Certificates of Participation,
Series C (FGIC Insured) (final
maturity 8/1/17)*................. VMIG1/AAA A1+/AAA 3.55% 09/02/97 20,650,000 20,650,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.50% 11/19/97 2,000,000 2,000,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.65% 11/06/97 4,000,000 4,000,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.65% 09/04/97 1,500,000 1,500,000
Otay Water District, Certificates
of Participation
(LOC -- Landesbank Hessen) (final
maturity 9/1/26)*................. VMIG1/AAA A1+/AAA 3.05% 09/03/97 2,200,000 2,200,000
Placer Unified High School District
Tax & Revenue Anticipation
Notes............................. MIG1/NR SP1+/NR 4.45% 09/04/97 3,700,000 3,700,152
Redlands Certificates of
Participation, Water Treatment
Facilities Project, (FGIC Insured)
(final maturity 9/1/17)*.......... VMIG1/AAA F1+/AAA 3.05% 09/03/97 3,515,000 3,515,000
Redlands Certificates of
Participation (FGIC Insured)
(final maturity 9/1/15)*.......... VMIG1/AAA A1+/AAA 3.05% 09/03/97 2,500,000 2,500,000
Riverside County Industrial
Development, Advanced Business
Forms, Inc. Project (AMT)
(LOC -- First National Bank)
(final maturity 4/1/14)*.......... VMIG1/AAA NR/NR 3.00% 09/04/97 1,500,000 1,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 230
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Riverside County Industrial
Development, Cryogenic Project,
Issue B (AMT) (LOC -- Rabobank
Nederland) (final maturity
7/5/14)*.......................... VMIG1/AAA NR/NR 3.00% 09/04/97 $ 1,400,000 $ 1,400,000
Riverside County Industrial
Development, Riverfront/Crest
Steel (AMT) (LOC -- First National
Bank) (final maturity 4/1/09)*.... VMIG1/AAA NR/NR 3.00% 09/04/97 2,950,000 2,950,000
Riverside County Transportation
(LOC -- Union Bank of
Switzerland)...................... P1/A1 A1/A 3.55% 09/04/97 2,000,000 2,000,000
Riverside County Transportation
Sales Tax Revenue (LOC --
Industrial Bank of Japan)......... P1/A1 A1/A 3.75% 10/07/97 3,000,000 3,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.60% 10/17/97 5,000,000 5,000,000
Sacramento County Multi-Family
Housing, Series A (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
4/15/07)*......................... VMIG1/A1 A1/A+ 3.25% 09/04/97 15,400,000 15,400,000
Sacramento County Multi-Family
Housing, Series C (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
4/15/07)*......................... VMIG1/A1 A1/A+ 3.25% 09/04/97 1,600,000 1,600,000
Sacramento County Municipal Note
Utility District (LOC --
Bayerische Landesbank)............ P1/Aaa A1+/AAA 3.60% 09/27/97 5,700,000 5,700,000
Sacramento County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 09/30/97 42,000,000 42,023,082
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.50% 10/28/97 8,000,000 8,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.30% 09/12/97 2,000,000 2,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.70% 10/17/97 4,293,000 4,293,000
San Bernardino County Industrial
Development Authority, NRI Inc.
Project (LOC -- California State)
(final maturity 5/1/09)*.......... NR/NR A1+/AA+ 3.25% 09/03/97 1,575,000 1,575,000
San Bernardino County Multi-Family
Housing, Brookside Meadows, Series
A (LOC -- Tokai Bank, Chase
Manhattan) (final maturity
8/1/05)*.......................... VMIG1/AA2 NR/NR 3.10% 09/03/97 13,000,000 13,000,000
San Bernardino County Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 06/30/98 7,000,000 7,036,240
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.65% 10/28/97 5,200,000 5,200,000
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.40% 09/09/97 5,000,000 5,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
45
<PAGE> 231
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.70% 11/21/97 $ 2,000,000 $ 2,000,000
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric, Series A.......... P1/A1 A1/A+ 3.75% 11/13/97 1,500,000 1,500,000
San Diego County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.38% 09/30/97 24,100,000 24,111,147
San Diego County Water Authority... P1/NR A1/NR 3.40% 09/09/97 2,000,000 2,000,000
San Diego Housing Authority, Multi-
Family Housing, Nobel Ct.
Apartments, Series L (LOC --
Citibank, New York) (final
maturity 12/1/08)*................ VMIG1/AA2 NR/NR 3.05% 09/04/97 1,700,000 1,700,000
San Diego Housing Authority, Multi-
Family Housing, Nobel Ct.
Apartments, Series L (LOC -- Tokai
Bank, Ltd.) (final maturity
12/1/08)*......................... VMIG2/A2 NR/NR 3.05% 09/04/97 9,700,000 9,700,000
San Francisco City and County
Airport (LOC -- Bayerische
Landesbank)....................... P1/NR A1+/NR 3.65% 11/19/97 12,500,000 12,500,000
San Francisco City and County
Airport (LOC -- Bayerische
Landesbank)....................... P1/NR A1+/NR 3.65% 11/18/97 3,000,000 3,000,000
San Francisco City and County
Airport (FGIC Insured) (final
maturity 5/1/21)*................. A1+/AAA NR/NR 3.45% 09/04/97 5,345,000 5,345,000
San Francisco City and County
Airport (MBIA Insured) (final
maturity 5/1/26)*................. A1+/AAA NR/NR 3.40% 09/04/97 3,905,000 3,905,000
San Francisco City and County
Multi-Family Housing, Bayside
Village Project D, Series A
(LOC -- Industrial Bank of Japan)
(final maturity 12/1/05)*......... VMIG1/A2 NR/NR 3.45% 09/04/97 1,000,000 1,000,000
San Francisco City and County
Multi-Family Housing, Winterland
Project, Series 85-C (LOC --
Citibank, New York) (final
maturity 6/1/06)*................. NR/NR A1+/AA- 3.15% 09/02/97 1,500,000 1,500,000
San Francisco City and County Tax &
Revenue Anticipation Notes........ MIG1/NR SP1+/NR 4.50% 10/08/97 35,500,000 35,526,853
San Mateo County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 07/01/98 7,000,000 7,039,166
Simi Valley Multi-Family Housing,
Lincoln Wood Ranch (LOC --
Sumitomo Bank, Ltd.) (final
maturity 6/1/10)*................. NR/NR A1/A 3.35% 09/04/97 7,500,000 7,500,000
Southeast Recovery Facility, Series
B (AMT) (LOC -- Industrial Bank of
Japan Ltd.) (final maturity
12/1/18)*......................... VMIG1/A2 A1/A 3.20% 09/03/97 3,300,000 3,300,000
Southeast Recovery Facility, Series
A (LOC -- Industrial Bank of Japan
Ltd.) (final maturity 12/1/18)*... VMIG1/A2 A1/A 3.10% 09/03/97 22,000,000 22,000,000
Southern California Metropolitan
Water Authority................... P1/NR A1+/NR 3.60% 11/13/97 5,700,000 5,700,000
</TABLE>
- ---------------
See Notes to Financial Statements.
46
<PAGE> 232
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ---------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Southern California Metropolitan
Water Authority................... P1/NR A1+/NR 3.55% 11/19/97 $ 4,000,000 $ 4,000,000
Tahoe-Truckee Unified School
District, Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.45% 09/04/97 4,000,000 4,000,164
Tustin Improvement Board Act 1915,
Reassessment District 95-2-A
(LOC -- Kredietbank) (final
maturity 9/2/13)*................. VMIG1/AA2 A1+/AA- 3.40% 09/02/97 1,600,000 1,600,000
Vallejo Industrial Development
Authority, Meyer Cookware Project,
Series A (AMT) (LOC -- Bank of
Tokyo) (final maturity
12/1/23)*......................... NR/NR A1/A+ 3.40% 12/01/23 3,300,000 3,300,000
Washington Township Hospital,
Series A (LOC -- Industrial Bank
of Japan) (final maturity
1/1/16)*.......................... VMIG1/A2 NR/NR 3.20% 09/04/97 16,000,000 16,000,000
West Basin Water District,
Certificates of Participation,
Water Project (LOC -- Bayerische
Vereinsbank) (final maturity
8/1/27)*.......................... VMIG1/AA1 NR/NR 2.95% 09/03/97 3,000,000 3,000,000
--------------
1,152,029,909
--------------
PUERTO RICO -- 0.8%
Puerto Rico Public Buildings
Authority, Trust Receipts, Series
SGA16 (AMBAC Insured) (final
maturity 7/1/21)*................. NR/NR A1+/AAA 3.30% 09/03/97 9,380,000 9,380,000
--------------
TOTAL INVESTMENTS (AMORTIZED COST
$1,161,409,909)(A) -- 99.9%....... 1,161,409,909
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%............... 722,897
--------------
NET ASSETS -- 100.0%............... $1,162,132,806
==============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $1,162,132,806.
(a) Cost for federal income tax and financial reporting purposes is
substantially the same.
AMBAC -- AMBAC Indemnity Corporation.
AMT -- Interest on securities subject to Federal Alternative Minimum Tax.
FGIC -- Financial Guaranty Insurance Company.
FSA -- Financial Security Assurance.
LOC -- Letter of Credit.
MBIA -- Municipal Bond Insurance Association.
NR -- No rating assigned by Moody's or S&P.
* Variable rate security. Maturity date reflects the next rate change date.
+ The ratings provided consist of short-term and long-term ratings.
See Notes to Financial Statements.
47
<PAGE> 233
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY MARKET
FUND FUND
------------ --------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (amortized cost
$675,378,762, and $1,161,409,909, respectively)......... $675,378,762 $1,161,409,909
Interest Receivable....................................... 4,987,487 6,802,369
Receivable for investment securities sold................. 21,000,000 9,700,000
Receivable for capital shares sold........................ 5,411,487 9,219,947
Prepaid expenses.......................................... 48,551 38,659
Other assets.............................................. 1,612 13,911
------------ -------------
Total Assets............................................... 706,827,899 1,187,184,795
------------ -------------
LIABILITIES:
Payable to bank........................................... 1,756,798 192,929
Dividends payable......................................... 1,746,201 2,894,338
Payable for investment securities purchased............... 52,984,115 5,000,000
Payable for capital shares redeemed....................... 1,486,389 16,339,160
Investment advisory fees payable.......................... 55,123 101,023
Administration fees payable............................... 55,123 101,023
Special management fees payable (Pacific Horizon
Shares)................................................. 68,056 150,624
Shareholder service fees payable (Horizon Service
Shares)................................................. 43,461 114,766
Shareholder service fees payable (X Shares)............... -- 13,484
Shareholder service fees payable (S Shares)............... 781 6,414
12b-1 fees payable (X Shares)............................. -- 11,822
12b-1 fees payable (S Shares)............................. 2,549 22,089
Custodian and fund accounting fees payable................ 40,774 20,333
Transfer agent fees payable............................... 7,845 194
Legal fees payable........................................ 14,078 22,403
Other accrued expenses.................................... 7,603 45,012
Other liabilities......................................... 114,496 16,375
------------ -------------
Total Liabilities.......................................... 58,383,392 25,051,989
------------ -------------
NET ASSETS................................................. $648,444,507 $1,162,132,806
============ =============
NET ASSETS:
Pacific Horizon Shares.................................... $125,645,416 $ 552,976,956
Horizon Shares............................................ 314,659,354 --
Horizon Service Shares.................................... 201,920,043 530,276,082
X Shares.................................................. -- 42,026,222
S Shares.................................................. 6,219,694 36,853,546
------------ -------------
Total...................................................... $648,444,507 $1,162,132,806
============ =============
Shares Outstanding ($0.001 par value, 7.5 billion and 3
billion shares authorized):
Pacific Horizon Shares.................................... 125,673,075 552,990,812
Horizon Shares............................................ 314,809,976 --
Horizon Service Shares.................................... 201,952,032 530,313,144
X Shares.................................................. -- 42,027,842
S Shares.................................................. 6,219,699 36,853,653
------------ -------------
Total...................................................... 648,654,782 1,162,185,451
============ =============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE
PER SHARE................................................. $1.00 $1.00
===== =====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 648,655 $ 1,162,185
Additional paid-in capital................................ 647,969,431 1,160,959,805
Accumulated undistributed net investment income........... 52,442 62,301
Accumulated net realized losses on investment
transactions............................................ (226,021) (51,485)
------------ -------------
NET ASSETS, AUGUST 31, 1997................................ $648,444,507 $1,162,132,806
============ =============
</TABLE>
- ---------------
See Notes to Financial Statements.
48
<PAGE> 234
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY MARKET
FUND FUND
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................. $10,669,668 $18,881,760
----------- -----------
EXPENSES:
Investment advisory fees............................. 287,597 525,653
Administration fees.................................. 287,597 525,653
Special management fees (Pacific Horizon Shares)..... 166,410 812,875
Shareholder service fees (Horizon Service Shares).... 230,549 624,698
Shareholder service fees (X Shares).................. -- 46,648
Shareholder service fees (S Shares).................. 895 7,728
12b-1 fees (X Shares)................................ -- 55,978
12b-1 fees (S Shares)................................ 2,686 23,185
Custodian and fund accounting fees................... 94,928 77,938
Transfer Agent fees.................................. 30,751 38,615
Legal fees........................................... 23,384 43,438
Other expenses....................................... 91,345 103,854
----------- -----------
Total Expenses..................................... 1,216,142 2,886,263
Less: Fee waivers.................................... (1,611) (13,911)
Expenses paid by third parties................. (6,862) (14,109)
----------- -----------
Total Net Expenses..................................... 1,207,669 2,858,243
----------- -----------
NET INVESTMENT INCOME.................................. 9,461,999 16,023,517
----------- -----------
NET REALIZED LOSSES ON INVESTMENTS:
Net realized losses on investment transactions....... (37,994) (40,625)
----------- -----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $ 9,424,005 $15,982,892
=========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
49
<PAGE> 235
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT
TAX-EXEMPT MONEY FUND MONEY MARKET FUND
----------------------------------- -----------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED
1997 FEBRUARY 28, 1997 FEBRUARY 28,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------ --------------- -------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income......... $ 9,461,999 $ 13,859,405 $ 16,023,517 $ 24,332,592
Net realized gains (losses) on
investment transactions..... (37,994) (26,740) (40,625) 26,388
------------ --------------- -------------- ---------------
Change in net assets resulting
from operations............. 9,424,005 13,832,665 15,982,892 24,358,980
------------ --------------- -------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Pacific Horizon Shares........ (1,619,004) (1,704,176) (7,695,663) (14,425,062)
Horizon Shares................ (4,896,550) (8,858,516) -- --
Horizon Service Shares........ (2,936,518) (3,296,713) (7,721,952) (9,708,150)
S Shares...................... (9,927)(c) -- (81,844)(b) --
X Shares...................... -- -- (524,058) (199,380)(a)
------------ --------------- -------------- ---------------
Change in net assets from
shareholder distributions..... (9,461,999) (13,859,405) (16,023,517) (24,332,592)
------------ --------------- -------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares Issued... 786,510,190 1,611,040,281 1,444,000,127 2,140,307,421
Dividends reinvested.......... 2,021,033 2,774,538 10,161,314 19,760,377
Cost of shares redeemed....... (659,582,299) (1,481,260,268) (1,285,710,000) (1,897,767,756)
------------ --------------- -------------- ---------------
Change in net assets from
capital share transactions.... 128,948,924 132,554,551 168,451,441 262,300,042
------------ --------------- -------------- ---------------
Change in net assets........... 128,910,930 132,527,811 168,410,816 262,326,430
NET ASSETS
Beginning of Period........... 519,533,577 387,005,766 993,721,990 731,395,560
------------ --------------- -------------- ---------------
End of Period................. $648,444,507 $ 519,533,577 $1,162,132,806 $ 993,721,990
============ =============== ============== ===============
</TABLE>
- ---------------
(a) Period from October 2, 1996 (inception date) to February 28, 1997.
(b) Period from June 18, 1997 (inception date) to August 31, 1997.
(c) Period from July 8, 1997 (inception date) to August 31, 1997.
See Notes to Financial Statements.
50
<PAGE> 236
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen portfolios. The accompanying
financial statements and notes are those of the Pacific Horizon Tax-Exempt Money
Fund (the "Tax-Exempt Fund") and Pacific Horizon California Tax-Exempt Money
Market Fund (the "California Tax-Exempt Fund"), collectively the "Funds",
individually the "Fund".
The Tax-Exempt Fund issues four classes of shares (Pacific Horizon Shares,
Horizon Shares, Horizon Service Shares and effective July 8, 1997, S Shares) and
California Tax-Exempt Fund issues four classes of shares (Pacific Horizon
Shares, Horizon Service Shares, and effective October 2, 1996, X Shares and
effective June 18, 1997, S Shares). The California Tax-Exempt Fund is authorized
to issue a fifth class of shares (Horizon Shares). Pacific Horizon Shares have a
Special Management Services Agreement/Plan while the Horizon Service Shares have
a Shareholder Services Plan. X Shares and S Shares have a Distribution and
Services Plan.
The Funds' seek to provide as high a level of current interest income exempt
from federal income taxes as is consistent with relative stability of principal
and daily liquidity. In addition, the California Tax-Exempt Fund seeks to
provide income that is also exempt from California state income taxes.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund, through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
51
<PAGE> 237
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The securities of the Funds 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 principal amount due at maturity and initial
cost. In addition, the portfolios 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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses from security transactions are recorded on an
identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses (other than class specific expenses) and
realized and unrealized gains and losses on investments of a fund are allocated
to each class of shares based upon their relative net asset value on the date
income
52
<PAGE> 238
is earned or expenses and realized and unrealized gains and losses are incurred.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income is declared as a dividend daily, and paid
monthly, to shareholders of record at the close of business on record date. Net
realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains of the Funds can be
offset by capital loss carryovers of the Funds, such gains will not be
distributed. Dividends and distributions are recorded by the Funds on the
ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET GAIN/(LOSS)
INVESTMENT ON
INCOME INVESTMENTS
------------- ------------
<S> <C> <C>
Tax-Exempt Fund $52,442 $(15,746)
California Tax-
Exempt Fund -- (659)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely all of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the Tax-Exempt Fund and California Tax-Exempt Fund had
the following capital loss carryovers:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
FUND CARRYOVER DATE
- ------------------------- ------------ -----------
<S> <C> <C>
Tax-Exempt Fund $ 16,664 1998
14,011 2000
71,218 2002
19,132 2003
36,425 2004
30,577 2005
-------
$188,027
=======
California Tax-Exempt
Fund $ 4,266 2004
=======
</TABLE>
To the extent that these loss carryovers are used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders. During the year ended February 28, 1997, the California Tax-Exempt
Fund utilized $32,982 of its available capital loss carryover to offset realized
capital gains for federal income tax purposes,
53
<PAGE> 239
while $35,348 of capital loss carryovers expired for the Tax-Exempt Fund.
Capital losses incurred after October 31 for the California Tax-Exempt Fund
are deemed to arise on the first business day of the following fiscal year for
tax purposes. The Fund has incurred and elected to defer capital losses of
$6,594 after October 31, 1996.
OTHER:
The Funds maintain a cash balance with its custodian and receives a
reduction of its custody fees and expenses for the amount of interest earned on
such uninvested cash balances. For financial reporting purposes for the six
months ended August 31, 1997, custodian fees and expenses paid by third parties
were increased by $6,862 and $14,109 for the Tax-Exempt Fund and California Tax-
Exempt Fund. There was no effect on net investment income. The Fund could have
invested such cash amounts in income producing assets if it had not agreed to a
reduction of fees or expenses under the expense offset arrangement with its
custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America. For
the six months ended August 31, 1997, the Funds had an Administration Agreement
with BISYS and a Distribution Agreement with the Distributor. Bank of America is
entitled to a fee from each Fund, which is accrued daily and payable monthly, at
an annual rate of 0.10% of each Fund's first $3 billion of net assets, plus
0.09% of each Fund's next $2 billion of net assets, plus 0.08% of each Fund's
net assets in excess of $5 billion. BISYS is entitled to a fee from each Fund
which is accrued daily and payable monthly, at an annual rate of 0.10% of each
Fund's first $7 billion of net assets, plus 0.09% of each Fund's next $3 billion
of net assets, plus 0.08% of each Fund's net assets in excess of $10 billion.
The Funds have entered into a Special Management Services Agreement (the
"Services Agreement") pursuant to which they agree to pay Bank of America and
BISYS 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% and 0.35%
for the Tax-Exempt Money Fund and California Tax-Exempt Fund, respectively, of
the average daily net assets of the outstanding Pacific Horizon Shares of each
Fund. Fees under the Services Agreement are borne solely by the Pacific Horizon
Shares.
Effective January 1997, the Services Agreement was terminated. The Funds
have adopted a Special Management Services Plan (the "Services Plan") pursuant
to which Service Organizations agree to provide certain services to their
clients who are beneficial owners of Pacific Horizon Shares in return for a
payment by the Funds of a fee at an annual rate of 0.32% and 0.35% for the
Tax-Exempt Money Fund and California Tax-Exempt Fund, respectively, of the
average daily net assets of the outstanding Pacific Horizon Shares of each Fund.
Currently, the California Tax-Exempt Fund is waiving 0.03% in special management
fees. Fees under the Services Plan are borne solely by the Pacific Horizon
Shares. Service Organiza-
54
<PAGE> 240
tions may include Bank of America, BISYS and its affiliates. For the six months
ended August 31, 1997, the Funds were advised that Bank of America and its
affiliates and BISYS earned the following amounts pursuant to the Services
Agreement and Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES BISYS
- ------------------------- ----------- ------
<S> <C> <C>
Tax-Exempt Fund $ 162,947 $2,939
California Tax-Exempt
Fund 807,230 5,548
</TABLE>
The Funds' have also adopted a Shareholder Services Plan (the "Horizon
Services 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 Funds of a fee at an annual rate of 0.25% of the
average daily net assets of the Horizon Service Shares. Fees under the Horizon
Services Plan are borne solely by the Horizon Service Shares. Service
Organizations may include the Distributor, Bank of America and its affiliates.
For the six months ended August 31, 1997, the Funds were advised that Bank of
America and its affiliates earned the following amounts pursuant to the Horizon
Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
Tax-Exempt Fund $ 189,273
California Tax-Exempt Fund 512,823
</TABLE>
The California Tax-Exempt Fund has adopted the Distribution and Services
Plan under which the Funds pay 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 such Fund's X Shares. For the six months ended August 31, 1997 the
Funds were advised that Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
California Tax-Exempt Fund $46,481
</TABLE>
The Funds have adopted the Distribution and Services Plan under which the
Fund pays the Distributor and Service Organization for the provision of support
services with respect to the beneficial owners of S shares. Payments for the
distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%, respectively, of the average daily net assets of
the Funds' S shares. For the period from July 8, 1997(date of inception) to
August 31, 1997 the Fund was advised that Bank of America and its affiliates
earned the following amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
Tax-Exempt Fund $ 895
California Tax-Exempt Fund $ 7,718
</TABLE>
Prior to February 28, 1997, BankAmerica Corporation obtained a letter of
credit issued by a third-party financial institution which guaranteed the
payment of principal and interest of a security issued by Orange County
California that was held by the California Tax-Exempt Fund. This letter of
credit enabled the security, together with the letter of credit, to be valued at
par. BankAmerica Corporation agreed to reimburse the
55
<PAGE> 241
third-party financial institution to the extent any portion of this letter of
credit is drawn down. During the year ended February 28, 1997, this letter of
credit expired. The Orange County California Securities previously held by the
California Tax-Exempt Fund were substituted with a new issue from Orange County,
which does not require such letter of credit.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities for the Funds, BISYS Ohio earned $30,751 and $38,615 from
the Tax-Exempt Fund and California Tax-Exempt Fund, respectively, for the six
months ended August 31, 1997.
For the six months ended August 31, 1997, the Tax-Exempt Fund and California
Tax-Exempt Fund incurred legal charges totaling $23,384 and $43,438
respectively, which were earned by a law firm, a partner of which serves as
Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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 pursuant to the Retirement Plan
amounted to $2,471 and $1,987 for the Tax-Exempt Fund and California Tax-Exempt
Fund respectively, for the six months ended August 31, 1997.
56
<PAGE> 242
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Tax-Exempt Fund invests substantially all of its assets in a diversified
portfolio of tax-exempt debt obligations. The California Tax-Exempt Fund invests
substantially all of its assets in a nondiversified portfolio of tax-exempt debt
obligations primarily consisting of issuers in the State of California. The
issuers' abilities to meet their obligations may be affected by economic,
regional or political developments.
The Tax-Exempt Fund and the California Tax-Exempt Fund had the following
concentrations by industry sector at August 31, 1997 (as a percentage of total
investments):
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
FUND FUND
---------- ----------
<S> <C> <C>
Airport Facilities 1.5% 0.8%
Commercial Paper 16.4 22.0
Education 6.4 1.3
General Obligations 11.7 5.8
Healthcare 19.0 7.9
Housing Developments 7.1 14.5
Industrial Development
Revenue 5.2 3.6
Leases 1.5 3.6
Miscellaneous 2.8 0.3
Pollution Control 7.1 8.6
Power Projects 2.5 --
Revenue 10.7 17.9
Sewer Projects -- 4.5
Special Tax -- 0.4
Solid Waste 0.6 --
Transportation 3.0 5.1
Utilities 2.1 2.0
Waste Management 1.4 --
Water Projects 1.0 1.7
------ ------
100.0% 100.0%
====== ======
</TABLE>
57
<PAGE> 243
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of each Portfolio (at $1.00 per share) for the
periods indicated are summarized below:
<TABLE>
<CAPTION>
TAX-EXEMPT CALIFORNIA TAX-EXEMPT
MONEY FUND MONEY MARKET FUND
------------------------------------- -------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997 (UNAUDITED) FEBRUARY 28, 1997
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Pacific Horizon Shares
Issued................. 107,335,976 230,496,897 472,684,566 917,590,384
Reinvested............. 1,286,411 1,545,273 6,297,080 13,790,272
Redeemed............... (69,393,203) (195,234,875) (419,052,410) (966,354,368)
----------- ----------- ------------ -----------
Net
increase/(Decrease).... 39,229,184 36,807,295 59,929,236 (34,973,712)
=========== =========== ============ ===========
Horizon Shares
Issued................. 423,971,615 997,203,792 -- --
Reinvested............. 25,652 135,161 -- --
Redeemed............... (373,441,909) (1,035,902,063) -- --
----------- ----------- ------------ -----------
Net increase/
(Decrease)........... 50,555,358 (38,563,110) -- --
=========== =========== ============ ===========
Horizon Service Shares
Issued................. 248,702,939 383,339,592 877,065,089 1,184,396,760
Reinvested............. 655,199 1,094,104 3,431,872 5,770,710
Redeemed............... (216,413,455) (250,123,330) (821,759,112) (921,990,855)
----------- ----------- ------------ -----------
Net increase............ 32,944,683 134,310,366 58,737,849 268,176,615
=========== =========== ============ ===========
X Shares
Issued................. -- -- 45,086,213 38,320,277
Reinvested............. -- -- 420,087 199,395
Redeemed............... -- -- (32,575,597) (9,422,533)
----------- ----------- ----------- -----------
Net increase............ -- -- 12,930,703 29,097,139(a)
=========== =========== =========== ===========
S Shares
Issued................. 6,552,102 -- 49,164,259 --
Reinvested............. 1,329 -- 12,275 --
Redeemed............... (333,732) -- (12,322,881) --
----------- ----------- ----------- -----------
Net increase............ 6,219,699(c) -- 36,853,653(b) --
=========== =========== =========== ===========
</TABLE>
- ---------------
(a) Period from October 2, 1996 (inception date) to February 28, 1997.
(b) Period from June 18, 1997 (inception date) to August 31, 1997.
(c) Period from July 8, 1997 (inception date) to August 31, 1997.
58
<PAGE> 244
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD
AUGUST 31, ------------------------------------------ ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994(a)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0157 0.0290 0.0327 0.0253 0.0124
Less dividends to shareholders from
net investment income............. (0.0157) (0.0290) (0.0327) (0.0253) (0.0124)
------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- -- -- -- --
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
======= ======= ======= ======= =======
Total return....................... 1.58%(d) 2.94% 3.32% 2.56% 1.25%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 126 $ 86 $ 50 $ 37 $50
Ratio of expenses to average net
assets.......................... 0.60%(c) 0.60% 0.63% 0.60% 0.60%(c)
Ratio of net investment income to
average net assets.............. 3.12%(c) 2.91% 3.26% 2.47% 1.95%(c)
Ratio of expenses to average net
assets*......................... (e) (b) (b) (b) 0.61%(c)
Ratio of net investment income to
average net assets*............. (e) (b) (b) (b) 1.94%(c)
</TABLE>
- ---------------
* 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.
(a) Period from July 9, 1993 (inception date) to February 28, 1994.
(b) There were no fee waivers or expense reimbursements during the period.
(c) Annualized.
(d) Not Annualized.
(e) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
59
<PAGE> 245
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income....... 0.0173 0.0322 0.0359 0.0285 0.0225 0.0269
Less dividends to
shareholders from net
investment income........... (0.0173) (0.0322) (0.0359) (0.0285) (0.0225) (0.0269)
-------- -------- -------- -------- -------- --------
Net change in net asset value
per share................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return................. 1.75%(c) 3.27% 3.65% 2.89% 2.27% 2.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................ $ 315 $ 264 $ 303 $ 382 $ 515 $ 384
Ratio of expenses to average
net assets................ 0.28%(b) 0.28% 0.31% 0.28% 0.28% 0.28%
Ratio of net investment
income to average net
assets.................... 3.42%(b) 3.22% 3.58% 2.81% 2.25% 2.69%
Ratio of expenses to average
net assets*............... (d) (a) (a) (a) 0.29% (a)
Ratio of net investment
income to average net
assets*................... (d) (a) (a) (a) 2.24% (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Annualized.
(c) Not annualized.
(d) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
60
<PAGE> 246
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income.... 0.0161 0.0297 0.0334 0.0260 0.0200 0.0244
Less dividends to
shareholders from net
investment income........ (0.0161) (0.0297) (0.0334) (0.0260) (0.0200) (0.0244)
-------- ------- ------- ------- ------- -------
Net change in net asset
value per share.......... -- -- -- -- -- --
-------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE,
END OF PERIOD............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= =======
Total return.............. 1.62%(c) 3.01% 3.39% 2.63% 2.02% 2.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (millions)...... $ 202 $ 169 $ 35 $ 39 $ 48 $ 50
Ratio of expenses to
average net assets..... 0.53%(b) 0.53% 0.56% 0.53% 0.53% 0.53%
Ratio of net investment
income to average net
assets................. 3.19%(b) 2.98% 3.34% 2.57% 2.04% 2.42%
Ratio of expenses to
average net assets*.... (d) (a) (a) (a) 0.57% (a)
Ratio of net investment
income to average net
assets*................ (d) (a) (a) (a) 2.00% (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Annualized.
(c) Not annualized.
(d) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
61
<PAGE> 247
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD......... $ 1.00
Income from Investment Operations:
Net investment income................................ 0.0042
Less dividends to shareholders from net investment
income............................................... (0.0042)
--------
Net change in net asset value per share................ --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD............... $ 1.00
========
Total return........................................... 1.55%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............... $ 6
Ratio of expenses to average net assets.............. 0.83%(c)
Ratio of net investment income to average net
assets............................................. 2.77%(c)
Ratio of expenses to average net assets*............. (b)
Ratio of net investment income to average net
assets*............................................ (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 8, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
62
<PAGE> 248
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ----------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income....... 0.0153 0.0284 0.0324 0.0249 0.0186 0.0224
Net realized gains/(losses)
on investment
transactions.............. -- -- (0.0001) (0.0001) 0.0002 (0.0002)
-------- -------- -------- -------- -------- --------
Total income from investment
operations.................. 0.0153 0.0284 0.0323 0.0248 0.0188 0.0222
Less dividends to
shareholders from net
investment income........... (0.0153) (0.0284) (0.0324) (0.0249) (0.0186) (0.0224)
-------- -------- -------- -------- -------- --------
Net change in net asset value
per share................... -- -- (0.0001) (0.0001) 0.0002 (0.0002)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return................. 1.54%(d) 2.88% 3.29% 2.52% 1.88% 2.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................ $ 553 $ 493 $ 528 $ 187 $ 204 $ 128
Ratio of expenses to average
net assets................ 0.57%(c) 0.57% 0.62% 0.62% 0.66% 0.66%
Ratio of net investment
income to average net
assets.................... 3.03%(c) 2.83% 3.35% 2.48% 1.86% 2.21%
Ratio of expenses to average
net assets*............... (b) 0.60%** 0.63%** (a) 0.68% 0.74%
Ratio of net investment
income to average net
assets*................... (b) 2.80% (b) (a) 1.84% 2.13%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the
Portfolio received credits from its custodian for interest earned on
uninvested cash balances which were used to offset custodian fees and
expenses. If such credits had not occurred, the expense ratio would have
been as indicated. The ratio of net investment income was not affected.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
63
<PAGE> 249
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................... 0.0157 0.0291 0.0331 0.0256 0.0198
Net realized gains/(losses) on investment
transactions........................... -- -- 0.0001 (0.0001) (0.0001)
-------- -------- -------- -------- --------
Total income from investment operations... 0.0157 0.0291 0.0332 0.0255 0.0197
Less dividends to shareholders from net
investment income........................ (0.0157) (0.0291) (0.0331) (0.0256) (0.0198)
-------- -------- -------- -------- --------
Net change in net asset value per share... -- -- 0.0001 (0.0001) (0.0001)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return.............................. 1.58%(d) 2.95% 3.36% 2.59% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)... $ 530 $ 472 $ 203 $ 88 $ 124
Ratio of expenses to average net
assets................................. 0.50%(c) 0.50% 0.55% 0.55% 0.53%
Ratio of net investment income to average
net assets............................. 3.09%(c) 2.92% 3.43% 2.50% 1.98%
Ratio of expenses to average net
assets*................................ (b) (b) 0.55%** (a) 0.60%
Ratio of net investment income to average
net assets*............................ (b) (b) 3.42% (a) 1.91%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the year ended February 29, 1996 the Portfolio received credits from
its custodian for interest earned on uninvested cash balances which were
used to offset custodian fees and expenses. If such credits had not
occurred, the expense ratio would have been as indicated. The ratio of net
investment income was not affected.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
64
<PAGE> 250
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (a)
--------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD................................ $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income................. 0.0142 0.0107
Less dividends to shareholders from net
investment income..................... (0.0142) (0.0107)
-------- --------
Net change in net asset value per
share................................. -- --
-------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD................................ $ 1.00 $ 1.00
======== ========
Total return............................ 1.85% (d) 1.09%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions).......................... $ 42 $ 29
Ratio of expenses to average net
assets.............................. 0.80% (c) 0.80%(c)
Ratio of net investment income to
average net assets.................. 2.81% (c) 2.66%(c)
Ratio of expenses to average net
assets*............................. (b ) (b)
Ratio of net investment income to
average net assets*................. (b ) (b)
</TABLE>
- ---------------
* 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.
(a) Period from October 2, 1996 (inception date) to February 29, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
65
<PAGE> 251
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
----------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0057
Less dividends to shareholders from net investment
income................................................. (0.0057)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 1.85%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 37
Ratio of expenses to average net assets................ 0.80%(c)
Ratio of net investment income to average net assets... 2.65%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from June 18, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
66
<PAGE> 252
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 1
--------------
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
--------------
[PACIFIC HORIZON FUNDS LOGO]
Provident Distributor, Inc., Distributor
IST-0038 10/97
<PAGE> 2
PACIFIC HORIZON FUNDS, INC.
SRF SHARES OF THE
Asset Allocation Fund
Blue Chip Fund
Intermediate Bond Fund
PACIFIC HORIZON FUNDS, INC.
Prime Fund
SEMI-ANNUAL REPORT
August 31, 1997
NOT FDIC INSURED
Provident Distributors, Inc., Distributor
PACIFIC HORIZON FUNDS, INC.
<PAGE> 3
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 4
CONTENTS
<TABLE>
<S> <C>
. ECONOMIC REVIEW 2-3
. PACIFIC HORIZON ASSET ALLOCATION
. FUND
. Portfolio of Investments 4-10
. Statement of Assets and
. Liabilities 11
. Statement of Operations 12
. Statements of Changes
. in Net Assets 13
. PACIFIC HORIZON BLUE CHIP FUND AND
. PACIFIC HORIZON INTERMEDIATE BOND
. FUND
. Statements of Assets and
. Liabilities 14-15
. Statements of Operations 16-17
. Statements of Changes
. in Net Assets 18-19
. Notes to Financial Statements 20-28
. Financial Highlights 29-41
. MASTER INVESTMENT TRUST -- SERIES I
. Portfolios of Investments 42-47
. Statements of Assets
. and Liabilities 48-49
. Statements of Operations 50-51
. Statements of Changes
. in Net Assets 52-53
. Notes to Financial Statements 54-56
. Supplementary Data 57-58
. PACIFIC HORIZON PRIME FUND
. Portfolio of Investments 59-67
. Statement of Assets
. and Liabilities 68
. Statement of Operations 69
. Statements of Changes
. in Net Assets 70
. Notes to Financial Statements 71-77
. Financial Highlights 78-83
</TABLE>
<PAGE> 5
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
2
<PAGE> 6
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
3
<PAGE> 7
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- 57.5%
AEROSPACE/AIRLINES -- 0.9%
AMR Corporation**................................................. 4,800 $ 483,600
Boeing Co......................................................... 29,700 1,616,794
------------
2,100,394
------------
ALUMINUM -- 0.3%
Aluminum Company of America....................................... 7,500 616,875
------------
AUTOMOBILES -- 0.8%
Ford Motor Co. ................................................... 20,900 898,700
General Motors Corp. ............................................. 16,600 1,041,650
------------
1,940,350
------------
BANKS -- 3.8%
Banc One Corp. ................................................... 45,400 2,434,575
Chase Manhattan Corp. ............................................ 16,900 1,879,069
Citicorp.......................................................... 14,300 1,825,037
U.S.Bancorp....................................................... 10,192 892,437
Wells Fargo & Co. ................................................ 6,400 1,627,200
------------
8,658,318
------------
BEVERAGES -- 1.0%
Coca-Cola Co. .................................................... 39,600 2,269,575
------------
BUILDING MATERIALS -- 0.3%
Masco Corp ....................................................... 15,700 697,669
------------
CHEMICALS -- 1.6%
E.I. Du Pont De Nemours & Co. .................................... 20,200 1,258,712
Monsanto Corp. ................................................... 34,700 1,524,631
Praxair, Inc. .................................................... 15,800 844,312
------------
3,627,655
------------
COMPUTER SOFTWARE/HARDWARE -- 3.0%
IBM............................................................... 13,800 1,392,075
Microsoft Corp. .................................................. 31,400 4,150,688
Seagate Technology, Inc.**........................................ 34,700 1,325,106
------------
6,867,869
------------
CONTAINERS & PACKAGING -- 0.2%
Bemis Co., Inc. .................................................. 9,300 408,619
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
4
<PAGE> 8
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
COSMETICS/HOUSEHOLD PRODUCTS -- 2.1%
Colgate-Palmolive Co. ............................................ 7,600 $ 476,900
Gillette Co. ..................................................... 16,000 1,325,000
Newell Co. ....................................................... 19,600 771,750
Procter & Gamble Co. ............................................. 16,000 2,129,000
------------
4,702,650
------------
ELECTRONIC PRODUCTS -- 2.2%
General Electric Co. ............................................. 79,200 4,950,000
------------
ELECTRONIC SEMICONDUCTORS -- 2.6%
Intel Corp. ...................................................... 49,400 4,550,975
National Semiconductor Corp.**.................................... 41,900 1,435,075
------------
5,986,050
------------
FINANCIAL SERVICES -- 4.4%
American Express.................................................. 25,700 1,998,175
First Data Corp. ................................................. 57,500 2,361,094
Household International, Inc. .................................... 23,900 2,651,406
Morgan Stanley Group, Inc. ....................................... 63,600 3,060,750
------------
10,071,425
------------
FOOD -- 2.1%
Archer Daniels Midland Co......................................... 40,845 883,273
Kellogg Co. ...................................................... 19,600 877,100
Pioneer Hi-Bred International, Inc. .............................. 8,900 762,619
Ralston Purina Group.............................................. 9,800 882,000
Sara Lee Corp. ................................................... 20,300 817,075
W.M. Wrigley Jr., Co. ............................................ 7,400 536,500
------------
4,758,567
------------
GAS UTILITIES -- 0.8%
Columbia Gas System, Inc. ........................................ 27,400 1,808,400
------------
HOSPITAL CARE -- 0.7%
Abbott Laboratories............................................... 8,800 527,450
Becton Dickinson & Co. ........................................... 11,500 551,281
Johnson & Johnson Co. ............................................ 8,600 487,512
------------
1,566,243
------------
HOTELS & MOTELS -- 0.8%
HFS, Inc.**....................................................... 24,200 1,347,637
ITT Corp.**....................................................... 8,200 515,062
------------
1,862,699
------------
INSURANCE-PROPERTY & CASUALTY -- 1.0%
American International Group, Inc................................. 6,900 651,187
Chubb Corp. ...................................................... 23,800 1,591,625
------------
2,242,812
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
5
<PAGE> 9
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
LEISURE -- 0.7%
Disney (Walt) Co.................................................. 12,400 $ 952,475
Hilton Hotels Corp. .............................................. 10,700 328,356
Mattel, Inc. ..................................................... 9,300 310,969
------------
1,591,800
------------
MANUFACTURING-MACHINERY -- 1.2%
General Signal Corp. ............................................. 29,400 1,275,225
Illinois Tool Works, Inc. ........................................ 29,300 1,417,387
------------
2,692,612
------------
MEDIA -- 0.9%
ACNielsen Corp.**................................................. 1 23
Gannett, Inc. .................................................... 3,200 311,800
McGraw Hill Companies............................................. 5,900 361,744
Time Warner, Inc. ................................................ 13,000 669,500
Tribune Co. ...................................................... 13,000 642,687
------------
1,985,754
------------
MEDICAL SUPPLIES & EQUIPMENT -- 0.7%
Boston Scientific Corp.**......................................... 3,700 260,850
Guidant Corp. .................................................... 8,700 763,969
U.S. Surgical Corp. .............................................. 18,600 612,637
------------
1,637,456
------------
MULTI-INDUSTRY -- 2.1%
Corning Glass, Inc................................................ 18,200 962,325
Tenneco, Inc.**................................................... 30,200 1,466,587
Tyco International Ltd. .......................................... 29,500 2,313,906
------------
4,742,818
------------
NATURAL ENERGY -- 1.0%
Coastal Corp. .................................................... 17,100 987,525
Consolidated Natural Gas Co. ..................................... 22,000 1,299,375
------------
2,286,900
------------
OIL DOMESTIC & CRUDE -- 0.5%
Pennzoil Co....................................................... 14,300 1,103,781
------------
OIL INTERNATIONAL -- 2.9%
Chevron Corp. .................................................... 10,500 813,094
Exxon Corp. ...................................................... 33,500 2,049,781
Mobil Corp. ...................................................... 15,800 1,149,450
Texaco, Inc. ..................................................... 7,700 887,425
Williams Cos., Inc. .............................................. 22,600 1,052,312
USX Marathon Corp. ............................................... 20,600 670,788
------------
6,622,850
------------
OIL SERVICE -- 0.9%
Halliburton Co. .................................................. 21,800 1,040,950
Schlumberger, Ltd. ............................................... 11,800 899,012
------------
1,939,962
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
6
<PAGE> 10
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
PAPER PRODUCTS -- 1.9%
Champion International Corp. ..................................... 10,900 $ 645,144
Ikon Office Solutions, Inc. ...................................... 51,100 1,328,600
International Paper Co. +......................................... 16,200 854,550
Kimberly-Clark Corp. ............................................. 15,100 716,306
Mead Corp. ....................................................... 11,200 794,500
------------
4,339,100
------------
PHARMACEUTICALS -- 5.8%
American Home Products Corp....................................... 22,800 1,641,600
Amgen, Inc.**..................................................... 10,800 535,275
Bristol-Meyers Squibb Co. ........................................ 31,200 2,371,200
Lilly, (Eli) & Co. ............................................... 14,700 1,537,987
Medtronic, Inc. .................................................. 8,800 795,300
Merck & Co., Inc. ................................................ 26,300 2,414,669
Pfizer, Inc. ..................................................... 32,600 1,805,225
Schering-Plough Corp. ............................................ 17,800 854,400
Warner Lambert Co. ............................................... 9,100 1,156,269
------------
13,111,925
------------
PHOTOGRAPHY -- 0.2%
Eastman Kodak Co. ................................................ 5,900 385,713
------------
RAILROADS -- 0.7%
Burlington Northern Santa Fe...................................... 6,200 568,463
Caliber Systems, Inc. ............................................ 14,500 605,375
Union Pacific Corp. .............................................. 6,500 422,094
------------
1,595,932
------------
RESTAURANTS -- 0.4%
McDonald's Corp. ................................................. 18,000 851,625
------------
RETAIL -- 2.2%
CVS Corp. ........................................................ 18,000 1,014,750
Home Depot, Inc. ................................................. 22,500 1,061,719
Nordstrom, Inc. .................................................. 16,300 953,550
Wal-Mart Stores, Inc. ............................................ 54,800 1,945,400
------------
4,975,419
------------
RETAIL-MANUFACTURING -- 0.4%
Costco Companies, Inc............................................. 23,500 847,469
------------
TELECOMMUNICATIONS -- 2.7%
3 Com Corp. **.................................................... 33,000 1,647,937
Cisco Systems, Inc.**............................................. 31,700 2,389,388
Motorola, Inc. ................................................... 29,400 2,157,225
------------
6,194,550
------------
TELEPHONE -- 2.6%
Bell Atlantic Corp. .............................................. 13,440 972,720
GTE Corp. ........................................................ 31,800 1,417,088
MCI Communications Corp. ......................................... 46,200 1,316,700
WorldCom, Inc.**.................................................. 74,000 2,215,375
------------
5,921,883
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
7
<PAGE> 11
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
TOBACCO -- 1.1%
Philip Morris Cos., Inc. ......................................... 57,350 $ 2,501,894
------------
TOTAL COMMON STOCK
(COST $101,837,099)............................................... 130,465,613
------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS
S&P/MOODY'S MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ------------ ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
CORPORATE OBLIGATIONS -- 13.9%
CORPORATE BONDS -- 10.4%
AESOP Funding II Series 1997-1,
Class A1...................... AAA/Aaa 6.22% 10/20/01 $1,000,000 $ 998,907
Citibank Credit Card Master
Trust, ZCB.................... AAA/Aaa 0.00% 02/07/03 3,500,000 2,782,509
Citibank Credit Card Master
Trust I, ZCB.................. NR/Aaa 0.00% 08/15/06 2,000,000 1,247,730
Finova Capital Corp............. A-/Baa1 6.63% 09/15/01 3,500,000 3,482,500
First Union Corp................ A-/A2 6.55% 10/15/05 3,600,000 3,532,500
Ford Motor Credit Co............ A+/A1 5.75% 01/25/01 2,500,000 2,443,750
General Motors Acceptance
Corp.......................... A-/A3 7.13% 05/01/01 2,000,000 2,032,500
General Motors Acceptance
Corp.......................... A-/A3 6.88% 07/15/01 2,000,000 2,017,500
Sears Roebuck Acceptance Corp... A-/A2 7.00% 06/15/07 1,500,000 1,501,875
The Money Storetrust 1996-B..... AAA/Aaa 7.38% 05/15/17 3,500,000 3,567,276
------------
23,607,047
------------
MEDIUM TERM NOTES -- 3.5%
Bear Stearns.................... A2/A 6.50% 07/05/00 1,500,000 1,501,875
Chrysler Financial Corp......... A3/A- 5.63% 02/16/01 2,500,000 2,428,125
Fuji Bank....................... A3/NR 7.30% 03/29/49 1,500,000 1,509,109
PaineWebber Group............... BBB+/Baa1 7.02% 02/10/04 2,500,000 2,484,375
------------
7,923,484
------------
TOTAL CORPORATE OBLIGATIONS
(COST $31,295,447).............. 31,530,531
------------
U.S. GOVERNMENT OBLIGATIONS -- 8.6%
U.S. TREASURY BONDS -- 5.5%
U.S. Treasury Bond.............. 10.38%* 11/15/12 6,100,000 7,816,783
U.S. Treasury Bond.............. 8.13%* 08/15/21 4,000,000 4,672,520
------------
12,489,303
U.S. TREASURY NOTES -- 3.1%
U.S. Treasury Note.............. 6.25%* 02/15/07 7,100,000 7,015,580
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(COST $19,321,287)............ 19,504,883
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
8
<PAGE> 12
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 14.8%
Federal Home Loan Mortgage
Corporation Pool #G10304...... 6.50% 04/01/09 $ 778,164 $ 771,112
Federal Home Loan Mortgage
Corporation Pool #E60891...... 6.50% 07/01/10 2,842,654 2,816,893
Federal Home Loan Mortgage
Corporation Pool #297505...... 8.00% 06/01/17 11,936 12,424
Federal Home Loan Mortgage
Corporation Pool #533301...... 10.50% 04/01/19 24,584 27,142
Federal Home Loan Mortgage
Corporation Pool #544066...... 8.00% 12/01/19 9,614 9,971
FNCL Pool #325602............... 6.50% 10/01/10 496,238 491,430
FNCL Pool #313349............... 10.00% 01/01/27 1,276,365 1,390,042
Federal National Mortgage
Association Pool #1997-M5
Cl-C.......................... 6.74% 08/25/07 2,000,000 2,009,373
Federal National Mortgage
Association Pool #251116...... 8.00% 07/27/27 7,370,200 7,568,274
Government National Mortgage
Association Pool #146301...... 10.00% 02/15/16 81,890 90,206
GNSF Pool #278853............... 9.00% 11/15/19 304,237 328,006
GNSF Pool #276635............... 9.00% 12/15/19 233,202 251,421
GNSF Pool #780330............... 9.00% 12/15/19 1,216,634 1,305,600
GNSF Pool #283578............... 8.00% 01/15/20 75,287 78,440
GNSF Pool #231236............... 9.00% 01/15/20 234,199 252,496
GNSF Pool #258039............... 9.00% 01/15/20 225,154 242,744
GNSF Pool #234214............... 8.00% 03/15/20 99,003 103,149
GNSF Pool #318567............... 8.00% 01/15/22 14,342 14,861
GNSF Pool #317257............... 8.00% 02/15/22 13,551 14,029
GNSF Pool #312656............... 8.00% 02/15/22 436,628 452,183
GNSF Pool #316108............... 8.00% 03/15/22 444,327 460,017
GNSF Pool #316859............... 8.00% 03/15/22 728,299 753,790
GNSF Pool #311456............... 8.00% 04/15/22 495,950 513,153
GNSF Pool #321799............... 8.00% 04/15/22 381,408 394,639
GNSF Pool #323085............... 8.00% 05/15/22 860,319 890,162
GNSF Pool #373336............... 7.50% 05/15/22 659,662 668,938
GNSF Pool #350519............... 7.00% 06/15/23 17,605 17,490
GNSF Pool #373346............... 7.50% 06/15/22 760,065 770,754
GNSF Pool #388995............... 7.50% 07/15/22 826,999 838,629
GNSF Pool #389002............... 7.50% 08/15/22 620,592 629,319
GNSF Pool #342065............... 8.00% 11/15/22 301,841 311,933
GNSF Pool #295283............... 7.50% 11/15/22 882,581 895,268
GNSF Pool #780227............... 8.00% 12/15/22 180,925 186,692
GNSF Pool #326465............... 7.00% 11/15/23 1,013,059 1,006,411
GNSF Pool #369671............... 7.00% 12/15/23 2,132,316 2,118,322
GNSF Pool #371045............... 8.00% 02/15/24 261,217 269,869
FGLMC Pool #D66935.............. 7.50% 01/01/26 357,923 362,061
FGLMC Pool #D66969.............. 7.50% 01/01/26 813,508 823,931
FGLMC Pool #D68671.............. 7.50% 02/01/26 551,507 557,884
FGLMC Pool #D70402.............. 7.50% 03/01/26 96,822 98,093
FGLMC Pool #D69671.............. 7.50% 03/01/26 30,348 30,728
FGLMC Pool #D69839.............. 7.50% 04/01/26 458,268 463,996
FGLMC Pool #D69930.............. 7.50% 04/01/26 438,241 443,719
FGLMC Pool #D70086.............. 7.50% 04/01/26 510,248 516,626
FGLMC Pool #D71116.............. 7.50% 05/01/26 96,875 98,086
FGLMC Pool #D71404.............. 7.50% 05/01/26 1,257,210 1,272,925
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(COST $33,369,770).............. 33,623,231
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
9
<PAGE> 13
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 3.2%
BHP Finance +................... 6.42% 03/01/26 $4,000,000 $ 3,955,000
National Westminster Bank,
PLC........................... 9.45% 05/01/01 3,000,000 3,277,500
------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $7,116,612)............... 7,232,500
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------
<S> <C> <C>
TEMPORARY INVESTMENTS -- 1.7%
Temporary Investment Cash Fund.................................... 1,938,051 1,938,051
Temporary Investment Fund......................................... 1,938,051 1,938,051
------------
TOTAL TEMPORARY INVESTMENTS
(COST $3,876,102)................................................. 3,876,102
------------
TOTAL INVESTMENTS -- 99.7%
(COST $196,816,317)(A)............................................ 226,232,860
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%...................... 764,984
------------
NET ASSETS -- 100.0%............................................... $226,997,844
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $226,997,844.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $31,246,990
Unrealized depreciation................................. (1,830,447)
-----------
Net unrealized appreciation............................. $29,416,543
=============
</TABLE>
(ZCB) -- Zero Coupon Bond.
* Effective Yield.
** Non-income producing security.
+ Foreign Issuer.
See Notes to Financial Statements.
10
<PAGE> 14
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (cost $196,816,317).......................... $226,232,860
Interest and dividends receivable............................................... 1,361,543
Receivable for capital shares sold.............................................. 262,062
Receivable for investment securities sold....................................... 4,233,696
Deferred organization costs..................................................... 946
Prepaid expenses................................................................ 6,360
------------
Total Assets..................................................................... 232,097,467
------------
LIABILITIES:
Payable for capital shares redeemed............................................. 146,130
Payable for investment securities purchased..................................... 4,603,405
Investment advisory fees payable................................................ 72,161
Administration fees payable..................................................... 58,997
Shareholder service fees payable (A and K Shares)............................... 78,922
12b-1 fees payable (K Shares)................................................... 374
Transfer agent fees payable..................................................... 17,811
Other accrued expenses.......................................................... 121,823
------------
Total Liabilities................................................................ 5,099,623
------------
NET ASSETS....................................................................... $226,997,844
============
Net Assets:
A Shares........................................................................ $ 40,862,581
K Shares........................................................................ 866,502
SRF Shares...................................................................... 185,268,761
------------
Total............................................................................ $226,997,844
============
Shares Outstanding ($0.001 par value, 400 million shares authorized):
A Shares........................................................................ 2,015,318
K Shares........................................................................ 42,765
SRF Shares...................................................................... 11,598,114
------------
Total............................................................................ 13,656,197
============
NET ASSET VALUE
A Shares -- redemption price per share.......................................... $ 20.28
============
Maximum Sales Charge (A Shares)................................................. 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares / (100%-Maximum
Sales Charge))................................................................ $ 21.24
============
K Shares -- offering and redemption price per share............................. $ 20.26
============
SRF Shares -- offering and redemption price per share........................... $ 15.97
============
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................................. $ 13,656
Additional paid-in capital...................................................... 191,213,624
Distributions in excess of net investment income................................ (303,679)
Accumulated net realized gains on investment transactions....................... 6,657,700
Net unrealized appreciation on investments...................................... 29,416,543
------------
NET ASSETS, AUGUST 31, 1997...................................................... $226,997,844
============
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 15
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I -- Asset Allocation
Portfolio (a):
Interest income................................................................. $ 339,911
Dividend income................................................................. 98,956
------------
438,867
------------
Expenses........................................................................ 30,161
Less: Fee waivers and expense reimbursements.................................... (2,355)
------------
27,806
------------
Net Investment Income from Master Investment Trust,
Series I -- Asset Allocation Portfolio.......................................... 411,061
Interest income................................................................. 1,268,273
Dividend income................................................................. 360,455
------------
Total Income..................................................................... 2,039,789
------------
EXPENSES:
Advisory fees................................................................... 176,810
Administration fees............................................................. 84,875
Administrative and Shareholder service fees (K Shares).......................... 1,027
Shareholder service fees (A Shares)............................................. 48,020
Shareholder service fees (SRF Shares)........................................... 90,661
12b-1 fees (K Shares)........................................................... 2,059
Accounting fees................................................................. 28,692
Custodian fees.................................................................. 2,774
Transfer Agent fees............................................................. 39,410
Registration fees............................................................... 22,960
Reports to shareholders......................................................... 29,778
Amortization of organization costs.............................................. 12,880
Audit fees...................................................................... 8,172
Legal fees...................................................................... 1,086
Directors' fees................................................................. 1,260
Other expenses.................................................................. 2,900
------------
Total Expenses................................................................ 553,364
Less: Fee waivers and expense reimbursements..................................... (17,925)
------------
Total Net Expenses.............................................................. 535,439
------------
NET INVESTMENT INCOME............................................................ 1,504,350
------------
REALIZED / UNREALIZED GAINS ON INVESTMENTS (a):
Net realized gains on investment transactions................................... 9,506,400
Net change in unrealized appreciation on investments............................ 26,567,078
------------
Net realized / unrealized gains on investments................................... 36,073,478
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................. $ 37,577,828
============
</TABLE>
- ---------------
(a) On June 23, 1997, the Asset Allocation Fund withdrew its investment in the
Master Investment Trust, Series I and invested directly in investment
securities.
See Notes to Financial Statements.
12
<PAGE> 16
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income....................................... $ 1,504,350 $ 712,729
Net realized gain on investment transactions................ 9,506,400 2,440,559
Net change in unrealized appreciation on investments........ 26,567,078 1,517,990
------------ ------------
Change in net assets resulting from operations.............. 37,577,828 4,671,278
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares.................................................. (418,386) (682,373)
K Shares.................................................. (7,432) (3,691) (a)
SRF Shares (b)............................................ (1,519,657) --
Net realized gains from investment transactions
A Shares.................................................. (1,684,638) (998,763)
K Shares.................................................. (38,229) (15,739) (a)
SRF Shares (b)............................................ (2,845,904) --
------------ ------------
Change in net assets from shareholder distributions.......... (6,514,246) (1,700,566)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued................................. 167,089,824 15,869,326
Dividends reinvested........................................ 2,046,050 1,651,877
Cost of shares redeemed..................................... (8,787,396) (7,260,804)
------------ ------------
Change in net assets from capital share transactions......... 160,348,478 10,260,399
------------ ------------
Change in net assets......................................... 191,412,060 13,231,111
NET ASSETS
Beginning of Period......................................... 35,585,784 22,354,673
------------ ------------
End of Period (including distributions in excess of $303,679
and undistributed net investment income of $137,447,
respectively.)............................................ $226,997,844 $35,585,784
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) On June 23, 1997, Asset Allocation Fund of the Seafirst Retirement Funds
withdrew its investment in Master Investment Trust, Series I and merged its
assets with the Asset Allocation Fund creating a new class of SRF Shares on
that date.
See Notes to Financial Statements.
13
<PAGE> 17
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I -- Blue Chip
Portfolio, at value............................................. $538,657,972
Prepaid expenses.................................................. 35,671
------------
Total Assets........................................................ 538,693,643
------------
LIABILITIES:
Dividend payable.................................................. 4,020
Administration fees............................................... 69,781
Transfer agent fees payable....................................... 47,718
Shareholder service fees payable (A, K and SRF Shares)............ 55,144
Audit fees payable................................................ 12,242
Fund accounting fees and expense payable.......................... 11,919
Legal fees payable................................................ 18,438
Other accrued expenses............................................ 91,342
------------
Total Liabilities................................................... 310,604
------------
NET ASSETS.......................................................... $538,383,039
============
Net Assets
A Shares.......................................................... $216,029,073
K Shares.......................................................... 3,066,143
SRF Shares........................................................ 319,287,823
------------
Total............................................................... $538,383,039
============
Shares Outstanding ($0.001 par value, 300 million shares
authorized):
A Shares.......................................................... 8,002,386
K Shares.......................................................... 113,795
SRF Shares........................................................ 13,226,292
------------
Total............................................................... 21,342,473
============
NET ASSET VALUE:
A Shares -- redemption price per share............................ $27.00
Maximum Sales Charge (A Shares)................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge))................................. $28.27
============
K Shares -- offering and redemption price per share............... $26.94
============
SRF Shares -- offering and redemption price per share............. $24.14
============
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................... $ 21,342
Additional paid-in capital........................................ 416,754,130
Distributions in excess of net investment income.................. (181,737)
Accumulated net realized gains on investment transactions......... 22,587,253
Net unrealized appreciation on investments........................ 99,202,051
------------
NET ASSETS, AUGUST 31, 1997......................................... $538,383,039
============
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 18
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I --
Investment Grade Bond Portfolio, at value........................... $71,907,385
Deferred organization costs and prepaid expenses...................... 2,410
-----------
Total Assets............................................................ 71,909,795
-----------
LIABILITIES:
Reports to shareholders expenses payable.............................. 46,269
Fund accounting fees and expenses payable............................. 9,218
Audit fees payable.................................................... 7,622
Transfer agent fees payable........................................... 11,839
Other accrued expenses................................................ 30,216
-----------
Total Liabilities....................................................... 105,164
-----------
NET ASSETS.............................................................. $71,804,631
===========
Net Assets:
A Shares.............................................................. $35,305,694
K Shares.............................................................. 415,143
SRF Shares............................................................ 36,083,794
-----------
Total................................................................... $71,804,631
===========
Shares Outstanding ($0.001 par value, and 300 million shares
authorized):
A Shares.............................................................. 3,678,885
K Shares.............................................................. 43,280
SRF Shares............................................................ 3,359,281
-----------
Total................................................................... 7,081,446
===========
NET ASSET VALUE
A Shares -- redemption price per share................................ $9.60
===========
Maximum Sales Charge (A Shares)....................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge))..................................... $10.05
===========
K Shares -- offering and redemption price per share................... $9.59
===========
SRF Shares -- offering and redemption price per share................. $10.74
===========
COMPOSITION OF NET ASSETS:
Shares of common stock, at par........................................ $ 7,081
Additional paid-in capital............................................ 74,309,647
Distributions in excess of net investment income...................... (10,633)
Accumulated net realized losses on investment transactions............ (2,803,251)
Net unrealized depreciation on investments............................ 301,787
-----------
NET ASSETS, AUGUST 31, 1997............................................. $71,804,631
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 19
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I -- Blue
Chip Portfolio:
Dividend income................................................ $ 2,668,734
Interest income................................................ 254,784
------------
2,923,518
Expenses....................................................... 1,039,153
------------
Net Investment Income from Master Investment Trust, Series I -- Blue
Chip Portfolio..................................................... 1,884,365
------------
EXPENSES:
Shareholder service fees (A Shares)................................ 231,243
Shareholder service fees (K Shares)................................ 2,800
Shareholder service fees (SRF Shares).............................. 155,322
12b-1 fees (K Shares).............................................. 5,598
Administration fees................................................ 233,232
Transfer Agent fees................................................ 136,079
Registration fees.................................................. 23,592
Reports to shareholders............................................ 64,355
Fund accounting fees and expenses.................................. 30,564
Amortization of organization costs................................. 14,168
Audit fees......................................................... 3,570
Legal fees......................................................... 6,271
Directors' fees.................................................... 2,291
Other expenses..................................................... 39,446
------------
Total Expenses............................................... 948,531
Less: Fee waivers and expense reimbursements......................... (221,475)
------------
Total Net Expenses................................................. 727,056
------------
NET INVESTMENT INCOME................................................ 1,157,309
------------
REALIZED/UNREALIZED GAINS ON INVESTMENTS FROM INVESTMENT TRUST,
SERIES I -- BLUE CHIP PORTFOLIO:
Net realized gains on investment transactions.................... 32,224,675
Net change in unrealized appreciation on investments............. 80,612,767
------------
Net realized/unrealized gains on investments from Master Investment
Trust, Series I -- Blue Chip Portfolio............................. 112,837,442
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $113,994,751
============
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 20
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I --
Investment Grade Bond Portfolio:
Interest Income................................................... $ 1,403,839
-----------
Expenses.......................................................... 73,190
Less: Fee waivers and expense reimbursements...................... (42,931)
-----------
30,259
-----------
Net Investment Income from Master Investment Trust,
Series I -- Investment Grade Bond Portfolio....................... 1,373,580
-----------
EXPENSES:
Registration fees................................................. 25,769
Shareholder service fees (A Shares)............................... 36,384
Shareholder service fees (K Shares)............................... 465
Shareholder service fees (SRF Shares)............................. 17,401(a)
12b-1 fees (K Shares)............................................. 938
Administration fees............................................... 32,369
Transfer Agent fees............................................... 22,010
Fund accounting fees and expenses................................. 28,650
Reports to shareholders........................................... 33,866
Amortization of organization costs................................ 15,088
Audit fees........................................................ 6,982
Legal fees........................................................ 718
Directors fees.................................................... 285
Other operating expenses.......................................... 3,103
-----------
Total Expenses.............................................. 224,028
Less: Fee waivers and reimbursements................................ (64,175)
-----------
Total Net Expenses.................................................. 159,853
-----------
NET INVESTMENT INCOME............................................... 1,213,727
-----------
REALIZED / UNREALIZED GAINS (LOSSES) ON INVESTMENTS FROM MASTER
INVESTMENT TRUST, SERIES I -- INVESTMENT GRADE BOND PORTFOLIO
Net realized losses on investment transactions.................... (2,642,763)
Net change in unrealized depreciation on investments.............. 429,712
-----------
Net realized / unrealized losses on investments from Master
Investment Trust Series I -- Investment Grade Bond Portfolio...... (2,213,051)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ (999,324)
===========
</TABLE>
(a) Seafirst Retirement Funds were reorganized into the Pacific Horizon Funds on
June 23, 1997, creating the SRF Shares.
- ---------------
See Notes to Financial Statements.
17
<PAGE> 21
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income........................ $ 1,157,309 $ 1,022,481
Net realized gains on investment
transactions............................... 32,224,675 14,059,189
Net change in unrealized appreciation on
investments................................ 80,612,767 12,101,556
------------ ------------
Change in net assets resulting from
operations................................. 113,994,751 27,183,226
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares............................... (556,688) (980,276)
K Shares............................... (2,671) (998)(a)
SRF Shares (b)......................... (957,833) --
Net realized gains from investment
transactions:
A Shares............................... (11,977,846) (2,731,645)
K Shares............................... (149,419) (8,357)(a)
SRF Shares (b)......................... (9,569,624) --
------------ ------------
Change in net assets from shareholder
distributions................................ (23,214,081) (3,721,276)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................. 315,283,391 87,766,406
Dividends reinvested......................... 11,058,303 3,417,983
Cost of shares redeemed...................... (32,940,898) (27,378,220)
------------ ------------
Change in net assets from capital share
transactions................................. 293,400,796 63,806,169
------------ ------------
Change in net assets........................... 384,181,466 87,268,119
NET ASSETS:
Beginning of Period.......................... 154,201,573 66,933,454
------------ ------------
End of Period (including distributions in
excess of $181,737 and undistributed net
investment income of $178,145,
respectively.)............................. $538,383,039 $ 154,201,573
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
See Notes to Financial Statements.
18
<PAGE> 22
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997(a)
---------------- --------------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.......................... $ 1,213,727 $ 878,883
Net realized loss on investment transactions... (2,642,763) (159,361)
Net change in unrealized depreciation on
investments.................................. 429,712 (86,639)
---------------- --------------------
Change in net assets resulting from
operation.................................... (999,324) 632,883
---------------- --------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares..................................... (826,193) (874,813)
K Shares..................................... (9,753) (4,070)(a)
SRF Shares (b)............................... (392,509) --
Net realized gains from investment
transactions:
A Shares..................................... -- (93,821)
K Shares..................................... -- (7)(a)
SRF Shares (b)............................... -- --
---------------- --------------------
Change in net assets from shareholder
distributions.................................. (1,228,455) (972,711)
---------------- --------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................... 57,743,694 16,917,463
Dividends reinvested........................... 669,060 488,201
Cost of shares redeemed........................ (7,649,365) (6,976,214)
---------------- --------------------
Change in net assets from capital share
transactions................................... 50,763,389 10,429,450
---------------- --------------------
Change in net assets............................. 48,535,610 10,089,622
NET ASSETS
Beginning of Period............................ 23,269,021 13,179,399
---------------- --------------------
End of Period (including distributions in
excess of $10,633 and undistributed net
investment income of $4,095, respectively)... $ 71,804,631 $ 23,269,021
============== ==================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) On June 23, 1997, Bond Fund of Seafirst Retirement Funds withdrew its
investments in Master Investment Trust Series I and merged its assets with
the Intermediate Bond Fund creating a new class of SRF Shares on that date.
See Notes to Financial Statements.
19
<PAGE> 23
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Asset Allocation
Fund (the "Asset Allocation Fund"), Pacific Horizon Blue Chip Fund (the "Blue
Chip Fund"), and Pacific Horizon Intermediate Bond Fund (the "Intermediate Bond
Fund"), collectively the "Funds" individually the "Fund". The Funds offer A
Shares and effective July 22, 1996, began offering K Shares. On June 23, 1997,
the Asset Allocations Fund, Blue Chip Fund, and Bond Fund of the Seafirst
Retirement Funds merged into the Pacific Horizon Asset Allocation Fund, Pacific
Horizon Blue Chip Fund and Pacific Horizon Intermediate Bond Fund, respectively,
and the Pacific Horizon Asset Allocation Fund, Pacific Horizon Blue Chip Fund
and Pacific Horizon Intermediate Bond Fund began offering SRF Shares. A Shares
and SRF Shares have a Shareholder Services Plan while K Shares have a
Distribution Plan and Administrative and Shareholder Services Plan.
The Asset Allocation Fund seeks to obtain long term growth from Capital
Appreciation, dividend and interest income. The Asset Allocation Fund seeks to
achieve its objective by actively allocating investments among the three major
asset categories, Bonds, equity securities and cash equivalents. The Blue Chip
Fund and the Intermediate Bond Fund seeks to achieve its investment objective by
investing substantially all of its assets in the Blue Chip Portfolio and the
Investment Grade Bond Portfolio, respectively (individually the "Portfolio"
collectively the "Portfolios") of the Master Investment Trust -- Series I (the
"Trust") an open-ended management company that has the same investment
objectives as that of the Blue Chip Fund and the Intermediate Bond Fund. At
August 31, 1997, the Blue Chip Fund, and the Intermediate Bond Fund held the
proportionate interests in the corresponding Portfolios in the following
amounts:
Blue Chip Fund.................................................90.7%
Bond Fund......................................................58.9%
The financial statements of each Portfolio, including its portfolio of
investments, are included elsewhere within this report and should be read in
conjunction with the Blue Chip Fund's and the Intermediate Bond Fund's financial
statements.
Prior to June 23, 1997, the Asset Allocation Fund sought to achieve its
investment objective by investing substantially all of its assets in the Asset
Allocation Portfolio of the Trust, which had the same investment objective as
that of the Fund. Effective June 23, 1997, the Fund
20
<PAGE> 24
withdrew its investment in the Asset Allocation Portfolio and began investing
its assets directly in securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Asset Allocation Fund's
investment adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned
subsidiary BISYS Fund Services, Limited Partnership, served as the Funds'
administrator through September 15, 1997. Concord Financial Group, Inc. (the
"Distributor"), an indirect, wholly-owned subsidiary of BISYS served as the
distributor of the Funds' shares through September 15, 1997. BISYS Fund
Services, Inc. ("BISYS Ohio"), also a wholly-owned subsidiary of BISYS served as
transfer agent and dividend disbursing agent of the Funds through October 24,
1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc.("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make esti-
21
<PAGE> 25
mates and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those of estimates.
PORTFOLIO VALUATIONS:
The Asset Allocation Fund values portfolio securities (other than debt
securities with remaining maturities of 60 days or less) at the last reported
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the NASDAQ National Securities Market.
Securities not listed on an exchange or the NASDAQ National Securities Market or
securities for which there were no transactions are valued at the mean between
the current quoted bid and ask prices on the date of the valuation. Bid price is
used when no ask price is available. The Fund may also use an independent
pricing service, approved by the Board of Directors, to value certain of their
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
Directors. Debt securities with remaining maturities of 60 days or less are
valued at amortized cost.
The valuation of securities of the Blue Chip Fund's and Intermediate Bond
Fund's investments in the Portfolios are discussed in Note 2 of the Portfolios.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recognized on the ex-dividend date. Realized gains and
losses from security transactions are recorded on an identified cost basis.
The Blue Chip Fund, Intermediate Bond Fund, and prior to June 23, 1997, the
Asset Allocation Fund recorded its share of the investment income, expenses and
realized and unrealized gains and losses recorded by the Portfolio on a daily
basis. The investment income, expenses and realized and unrealized gains and
losses were allocated daily to investors in the Portfolio based upon the value
of their investments in the Portfolio. Such investments were adjusted on a daily
basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
22
<PAGE> 26
The Funds incurred certain costs in connection with its organization. Such
costs have been deferred and are being amortized on a straight line basis over
five years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Asset Allocation Fund's and Blue Chip Fund's net investment income is
declared and paid as a dividend, quarterly, to shareholders of record at the
close of business on record date. The Intermediate Bond Fund's net investment
income is declared monthly and paid within five business days after the end of
each month as a dividend to shareholders of record. Net realized gains on
portfolio securities, if any, are distributed at least annually. However, to the
extent that net realized gains of the Funds can be offset by capital loss
carryovers of the Funds, such gains will not be distributed. Dividends and
distributions are recorded by the Funds on the ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET GAIN/(LOSS)
INVESTMENT ON
INCOME INVESTMENTS
------------- ------------
<S> <C> <C>
Asset Allocation
Fund $(1,681) $ 1,679
Blue Chip Fund -- 72
Intermediate Bond
Fund 4,095 (4,095)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the Intermediate Bond Fund had the following net
capital loss carryover of $160,488 expires 2005.
23
<PAGE> 27
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America and the
Funds had an Administration Agreement with BISYS and a Distribution Agreement
with the Distributor. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee from the Funds, which is accrued
daily and payable monthly, at an annual rate of 0.45% and 0.40% of the Capital
Income Fund and the Asset Allocation Fund, respectively, of average daily net
assets. Pursuant to the terms of the Administration Agreement, BISYS was
entitled to a fee, which is accrued daily and payable monthly, at an annual rate
of 0.15%, of the average daily net assets of the Asset Allocation Fund, Blue
Chip Fund and Intermediate Bond Fund, respectively. For the six months ended
August 31, 1997, BISYS agreed to waive $17,413 and $303 of its fees as
Administrator for the Asset Allocation Fund, and the Blue Chip Fund.
For the six months ended August 31, 1997, the Distributor advised the Funds
that it retained $10,017, $90,494 and $504 from commissions earned on sales of
the Asset Allocation Fund's, Blue Chip Fund's and Intermediate Bond Fund's
shares, respectively. For the same period, Bank of America and its affiliates
advised the Funds that they retained $80,229, $706,924 and $3,950 from
commissions earned on sales of shares of the Asset Allocation Fund, Blue Chip
Fund and Intermediate Bond Fund, respectively.
The Funds have a Shareholder Services Plan (the "Plan") under which each
Fund pays the Distributor for shareholder servicing expenses incurred in
connection with A Shares of each Fund. Under the Plan, payments for shareholder
servicing expenses may not exceed 0.25% of each Fund's average daily net assets
for A Shares. For the six months ended August 31, 1997, Asset Allocation Fund,
Blue Chip Fund and Intermediate Bond Fund, incurred charges of $48,020, $231,243
and $36,384, respectively, pursuant to the Plan. The Funds were advised that of
these amounts, the Distributor retained $3,323, $32,170 and $9,748 from the
Asset Allocation Fund, Blue Chip Fund and Intermediate Bond Fund, respectively,
and affiliates of Bank of America retained $41,559, $194,756 and $3,052,
respectively. The Plan provides that if, in any month, the fees paid to the
Distributor are less than the costs incurred by the Distributor, the excess
costs will be included in future computations of the fee, provided that any
excess cost will not be carried forward beyond the end of the fiscal year in
which such excess costs were incurred.
The Funds have adopted a Distribution Plan and an Administrative and
Shareholder Services Plan (the "Administrative Plan") with respect to K Shares
of the Funds. Under the Distribution Plan, the Funds pay the Distributor for
expenses primarily intended to result in the sale of the Funds' K Shares. Under
the Distribution Plan, payments by the Funds for distribution expenses may not
exceed 0.75% of the average daily net
24
<PAGE> 28
assets of each Fund's K Shares. Payments for distribution expenses under the
Distribution Plan are subject to Rule 12b-1 under the Act. Under the
Administrative Plan, the Funds pay for expenses incurred in connection with
shareholder services provided by the Distributor and payments to Service
Organizations for the provision of support services with respect to beneficial
owners of K Shares. Under the Administrative Plan, payments for shareholder
services and administrative services may not exceed 0.25% and 0.75%,
respectively, of the average daily net assets of each Fund's K Shares. The total
of all payments under the Distribution Plan and the Administrative Plan may not
exceed, in the aggregate, the annual rate of 1.00% of the average daily net
assets of each Fund's K Shares. For the six months ended August 31, 1997, the
Distributor received fees of $1,027, $5,581 and $465 for the Asset Allocation
Fund, Blue Chip Fund and Intermediate Bond Fund, respectively. The Funds were
advised that of these amounts the Distributor retained $929 from the Asset
Allocation Fund. For the same period, shareholder services fees of $98 and $351
were waived by the Asset Allocation Fund and Intermediate Bond Fund,
respectively.
The Funds have a Shareholder Services Plan under which the Funds pay the
Distributor for shareholder servicing expenses incurred in connection with the
SRF shares. Under the Plan, payments for shareholder servicing expenses may not
exceed 0.25% of the Funds' average daily net assets for SRF shares. For the six
months ended August 31, 1997, Asset Allocation Fund, Blue Chip Fund and
Intermediate Bond Fund incurred charges of $90,661, $155,322 and $17,401,
pursuant to the Plan. The Funds were advised that of these amounts the
affiliates of Bank of America retained $90,082, $16,258 and $17,401. For the
same period, shareholder services fees of $579, $139,064 and $5,772 were waived
by The Asset Allocation Fund, Blue Chip Fund and Intermediate Bond Fund.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $39,410, $136,079 and $22,010 from the
Asset Allocation Fund, Blue Chip Fund and Intermediate Bond Fund, respectively,
for the six months ended August 31, 1997.
For the six months ended August 31, 1997, the Asset Allocation Fund, Blue
Chip Fund and Intermediate Bond Fund incurred legal charges totaling $1,086,
$6,271 and $718, respectively, which were earned by a law firm, a partner of
which serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the
25
<PAGE> 29
Committee. In addition, the Company's President is entitled to an annual salary
of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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 pursuant to the Retirement Plan
amounted to $1,083, $210 and $70 for the Asset Allocation Fund, Blue Chip Fund
and Intermediate Bond Fund, respectively, for the six months ended August 31,
1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of Asset Allocation Fund's securities (excluding short-term
investments) amounted to $81,885,812 and $84,330,777, respectively.
26
<PAGE> 30
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of common stock of the Funds are summarized below:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
-----------------------------------------------------
SIX MONTHS ENDED AUGUST
31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ------- -----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued...................................... 308 $ 6,128 825 $ 15,144
Reinvested.................................. 101 2,000 90 1,632
Redeemed.................................... (189) (3,759) (395) (7,251)
------ -------- ------ --------
Net increase................................. 220 $ 4,369 520 $ 9,525
====== ======== ====== ========
K Shares
Issued...................................... 20,947 $ 422,460 37,991 $ 724,963
Reinvested.................................. 2,291 45,662 1,051 19,438
Redeemed.................................... (19,023) (380,905) (491) (9,394)
------ -------- ------ --------
Net increase................................. 4,215 $ 87,217 38,551 (a) $ 735,007(a)
====== ======== ====== ========
SRF Shares (000)(b)
Issued...................................... 11,883 $ 160,540 -- $ --
Reinvested.................................. -- -- -- --
Redeemed.................................... (285) (4,648) -- --
------ -------- ------ --------
Net Increase................................. 11,598 $ 155,892 -- $ --
====== ======== ====== ========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
<TABLE>
<CAPTION>
BLUE CHIP FUND
-----------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ------- -----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued...................................... 2,546 $ 67,284 3,838 $ 86,308
Reinvested.................................. 410 10,906 152 3,409
Redeemed.................................... (1,010) (26,554) (1,193) (27,364)
------- ---------- ------- ----------
Net increase................................. 1,946 $ 51,636 2,797 $ 62,353
======= ========== ======= ==========
K Shares
Issued...................................... 70,314 $1,881,745 57,851 $ 1,458,223
Reinvested.................................. 5,713 152,121 405 9,313
Redeemed.................................... (19,927) (541,316) (561) (13,822)
------- ---------- ------- ----------
Net increase................................. 56,100 $1,492,550 57,695 (a) $ 1,453,714(a)
======= ========== ======= ==========
SRF Shares(000's) (b)
Issued...................................... 13,486 $ 246,713 -- $ --
Reinvested.................................. -- -- -- --
Redeemed.................................... (260) (6,441) -- --
------- ---------- ------- ----------
Net increase................................. 13,226 $ 240,272 -- $ --
======= ========== ======= ==========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
27
<PAGE> 31
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
-----------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ------- -----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued...................................... 1,838 $ 17,554 1,730 $ 16,588
Reinvested.................................. 25 242 51 485
Redeemed.................................... (588) (5,619) (728) (6,976)
------- ---------- ------- ----------
Net increase................................. 1,275 $ 12,177 1,053 $ 10,097
======= ========== ======= ==========
K Shares
Issued...................................... 23,969 $ 228,806 34,567 $ 329,738
Reinvested.................................. 1,022 11,043 285 2,728
Redeemed.................................... (16,562) (158,684) (1) (1)
------- ---------- ------- ----------
Net increase................................. 8,429 $ 81,165 34,651 (a) $ 332,465(a)
======= ========== ======= ==========
SRF Shares(000's) (b)
Issued...................................... 3,483 $ 39,843 -- $ --
Reinvested.................................. 35 380 -- --
Redeemed.................................... (159) (1,718) -- --
------- ---------- ------- ----------
Net increase................................. 3,359 $ 38,305 -- $ --
======= ========== ======= ==========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
28
<PAGE> 32
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------ PERIOD ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(b) 1996 1995 1994(a)
--------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR.............. $ 19.40 $ 17.52 $ 15.15 $14.84 $ 15.00
------- ------- ------- ------ ------
Income from Investment
Operations:
Net investment income.......... 0.25 0.48 0.52 0.48 0.03
Net realized and unrealized
gains (losses) on investment
transactions................. 1.74 2.50 2.86 0.24 (0.19)
------- ------- ------- ------ ------
Total income (loss) from
investment operations.......... 1.99 2.98 3.38 0.72 (0.16)
------- ------- ------- ------ ------
Less Dividends and
Distributions:
Dividends to shareholders from
net investment income........ (0.22) (0.46) (0.53) (0.41) --
Dividends to shareholders from
net realized gains on
investment transactions...... (0.89) (0.64) (0.48) -- --
------- ------- ------- ------ ------
Total Dividends and
Distributions.................. (1.11) (1.10) (1.01) (0.41) --
------- ------- ------- ------ ------
Net change in net asset value
per share...................... 0.88 1.88 2.37 0.31 (0.16)
------- ------- ------- ------ ------
NET ASSET VALUE PER SHARE, END
OF PERIOD...................... $ 20.28 $ 19.40 $ 17.52 $15.15 $ 14.84
======= ======= ======= ====== ======
Total return (excludes sales
charge)........................ 10.43%++ 17.64% 22.80% 5.03% (1.07%)++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................... $38,075 $ 34,838 $ 22,355 $5,694 $ 666
Ratio of expenses to average
net assets................... 1.12%+ 1.25% 0.62% 0.00% 0.00%+
Ratio of net investment income
(loss) to average
net assets................... 2.62%+ 2.59% 3.49% 4.25% 4.20%+
Ratio of expenses to average
net assets*.................. 1.22%+ 1.94% 2.92% 7.89% 83.95%+
Ratio of net investment income
to average
net assets*.................. 2.52%+ 1.90% 1.19% (3.64%) (79.75% )+
</TABLE>
- ---------------
* 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.
+ Annualized.
++ Not annualized.
(a) Period from January 13, 1994 (inception date) to February 28, 1994.
(b) As of July 22, 1996, the Fund designated the existing series of shares as
"A" Shares.
See Notes to Financial Statements.
29
<PAGE> 33
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR..... $ 19.40 $17.23
------ ------
Income from Investment Operations:
Net investment income.......................... 0.21 0.19
Net realized gains/(losses) on investment
transactions................................. 1.72 2.80
------ ------
Total income from investment operations.......... 1.93 2.99
------ ------
Less: Dividends and Distributions:
Dividends to shareholders from net investment
income....................................... (0.18) (0.18)
Distributions to shareholders from net realized
gains on investment transactions............. (0.89) (0.64)
------ ------
Total Dividends and Distributions................ (1.07) (0.82)
------ ------
Net change in net asset value per share.......... 0.86 2.17
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD......... $ 20.26 $19.40
====== ======
Total return..................................... 10.08%++ 17.69%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)......... $ 815 $ 748
Ratio of expenses to average net assets........ 1.63%+ 1.94%+
Ratio of net investment income to average net
assets....................................... 2.11%+ 2.31%+
Ratio of expenses to average net assets*....... 1.73%+ 3.26%+
Ratio of net investment income to average net
assets*...................................... 2.01%+ 0.99%+
</TABLE>
- ---------------
* 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.
+ Annualized.
++ Not annualized.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
30
<PAGE> 34
THIS PAGE INTENTIONALLY LEFT BLANK
31
<PAGE> 35
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
--------------------------
MARCH 1,
JUNE 23, 1997
1997 THROUGH THROUGH YEAR ENDED
AUGUST 31, JUNE 22, ------------------------------------------
1997(c) 1997(b) FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1997(b) 1996(b) 1995(b)
------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR............................. $ 15.79 $ 15.94 $ 14.96 $13.48 $13.94
------ ----- ------ ------ ------
Income from Investment Operations:
Net investment income............... 0.09 1.61 0.45 0.47 0.46
Net realized and unrealized gains
(losses) on investment
transactions...................... 0.09 (0.15) 2.13 2.49 0.12
------ ----- ------ ------ ------
Total income from investment
operations.......................... 0.18 1.46 2.58 2.96 0.58
------ ----- ------ ------ ------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income................. -- (1.61) (0.45) (0.47) (0.46)
Distributions to shareholders from
net realized gains................ -- -- (1.15) (1.01) (0.58)
------ ----- ------ ------ ------
Total Dividends and Distributions.... -- (1.61) (1.60) (1.48) (1.04)
------ ----- ------ ------ ------
Net change in net asset value per
share............................... 0.18 (0.15) 0.98 1.48 (0.46)
------ ----- ------ ------ ------
NET ASSET VALUE PER SHARE, END OF
PERIOD.............................. $ 15.97 $ 15.79 $ 15.94 $14.96 $13.48
====== ===== ====== ====== ======
Total Return......................... 10.51%++ 7.88%++ 18.03% 22.44% 4.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions)........................ $ 185 $ 169 $ 174 $ 158 $ 145
Ratio of expenses to average net
assets............................ 1.00%+ 0.75%+ 0.95% 0.94% 0.78%
Ratio of net investment income
(loss) to average net assets...... 2.92%+ 2.23%+ 2.88% 3.19% 3.40%
Ratio of expenses to average net
assets*........................... 1.00%+ 1.15%+ 1.39% 1.42% 1.38%
Ratio of net investment income to
average net assets*............... 2.92%+ 1.83%+ 2.44% 2.71% 2.80%
Portfolio turnover rate............. 39%++ N/A N/A N/A N/A
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
+ Annualized.
++ Not Annualized.
(a) 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.
32
<PAGE> 36
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
- ------------------------------
DECEMBER 6, JANUARY 1,
1993 1993
THROUGH THROUGH YEAR ENDED
FEBRUARY 28, DECEMBER 5, DECEMBER 31,
1994(b) 1993(a) 1992(a)
- ------------ ------------ ------------
<S> <C> <C>
$13.86 $12.99 $12.75
------ ------ ------
0.05 0.43 0.46
0.08 0.87 0.24
------ ------ ------
0.13 1.30 0.70
------ ------ ------
(0.05) (0.43) (0.46)
-- -- --
------ ------ ------
(0.05) (0.43) (0.46)
------ ------ ------
0.08 0.87 0.24
------ ------ ------
$13.94 $13.86 $12.99
====== ====== ======
0.94%++ 10.15%++ 5.62%
$ 157 $ 150 $ 107
0.95%+ 0.95%+ 0.95%
2.64%+ 3.47%+ 3.68%
1.64%+ 0.95%+ 0.95%
1.95%+ 3.47%+ 3.68%
N/A 79% 171%
</TABLE>
- ---------------
(b) Represents activity of the Fund prior to its reorganization from the
Seafirst Retirement Funds -- Asset Allocation Fund into SRF Shares of the
Fund. Since the operation and organization of the Fund was changed upon
reorganization this activity may not be reflective of activity after the
reorganization.
(c) Date of commencement of operations of SRF Shares of the Fund.
See Notes to Financial Statements.
33
<PAGE> 37
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(a) 1996 1995 1994(b)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR.............................. $ 25.22 $20.53 $15.81 $14.97 $15.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................ 0.08 0.23 0.26 0.31 0.02
Net realized and unrealized gains
(losses) on investment
transactions....................... 3.52 5.21 4.96 0.80 (0.05)
-------- -------- -------- -------- --------
Total income (loss) from investment
operations........................... 3.60 5.44 5.22 1.11 (0.03)
-------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income.................. (0.08) (0.22) (0.28) (0.27) --
Dividends to shareholders from net
realized gains on investment
transactions....................... (1.74) (0.53) (0.22) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions..... (1.82) (0.75) (0.50) (0.27) --
-------- -------- -------- -------- --------
Net change in net asset value per
share................................ 1.78 4.69 4.72 0.84 (0.03)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................... $ 27.00 $25.22 $20.53 $15.81 $14.97
======== ======== ======== ======== ========
Total return (excludes sales
charge).............................. 14.42%++ 27.01% 33.39% 7.60% (0.20)%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)......................... $ 216 $ 153 $ 67 $ 6 $ 1
Ratio of expenses to average net
assets............................. 1.24%+ 1.28% 0.83% 0.00% 0.00%+
Ratio of net investment income (loss)
to average net assets.............. 0.67%+ 0.99% 1.63% 2.46% 2.92%+
Ratio of expenses to average net
assets*............................ 1.33%+ 1.71% 2.28% 6.32% 55.00%+
Ratio of net investment income to
average net assets*................ 0.58%+ 0.56% 0.18% (3.86)% (52.08)%+
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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.
+ Annualized.
++ Not annualized.
(a) As of July 22, 1996, the Fund designated the existing series of shares as "A" Shares.
(b) Period from January 13, 1994 (inception date) to February 28, 1994.
</TABLE>
See Notes to Financial Statements.
34
<PAGE> 38
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR............... $ 25.20 $20.38
-------- --------
Income from Investment Operations:
Net investment income.................................... 0.04 0.07
Net realized gains/(losses) on investment transactions... 3.47 5.35
-------- --------
Total income from investment operations.................... 3.51 5.42
-------- --------
Less: Dividends and Distributions:
Dividends to shareholders from net investment income..... (0.03) (0.07)
Distributions to shareholders from net realized gains on
investment transactions................................ (1.74) (0.53)
-------- --------
Total Dividends and Distributions.......................... (1.77) (0.60)
-------- --------
Net change in net asset value per share.................... 1.74 4.82
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD................... $ 26.94 $25.20
======== ========
Total return............................................... 14.10%++ 26.96%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................... $ 3 $ 1
Ratio of expenses to average net assets.................. 1.73%+ 1.92%+
Ratio of net investment income to average net assets..... 0.17%+ 0.45%+
Ratio of expenses to average net assets*................. 1.81%+ 2.12%+
Ratio of net investment income to average net assets*.... 0.09%+ 0.25%+
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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.
+ Annualized.
++ Not annualized.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
</TABLE>
See Notes to Financial Statements.
35
<PAGE> 39
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-------------------------- FOR THE PERIOD
JUNE 23, MARCH 1, --------------------------
1997 1997 DECEMBER 6, JANUARY 1,
THROUGH THROUGH YEAR ENDED 1993 1993
AUGUST 31, JUNE 22, ------------------------------------------ THROUGH THROUGH YEAR ENDED
1997 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, DECEMBER 5, DECEMBER 31,
(UNAUDITED) (UNAUDITED) 1997 1996 1995 1994 1993(a) 1992(a)
----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET
VALUE PER
SHARE,
BEGINNING
OF YEAR.... $ 24.02 $ 24.64 $21.09 $17.35 $17.75 $17.34 $ 15.65 $15.17
-------- -------- -------- -------- -------- -------- ------- ------
Income from
Investment
Operations:
Net
investment
income.... 0.04 4.01 0.31 0.31 0.28 0.05 0.29 0.30
Net
realized
and
unrealized
gains
(losses)
on
investment
transactions... 0.08 (0.57) 4.83 5.35 0.88 0.37 1.69 0.48
-------- -------- -------- -------- -------- -------- ------- ------
Total income
from
investment
operations... 0.12 3.44 5.14 5.66 1.16 0.42 1.98 0.78
-------- -------- -------- -------- -------- -------- ------- ------
Less
Dividends
and
Distributions:
Dividends
to
shareholders
from net
investment
income.... -- (4.06) (0.31) (0.31) (0.26) (0.01) (0.29) (0.30)
Distributions
to
shareholders
from net
realized
gains..... -- -- (1.28) (1.61) (1.30) -- -- --
-------- -------- -------- -------- -------- -------- ------- ------
Total
Dividends
and
Distributions.. -- (4.06) (1.59) (1.92) (1.56) (0.01) (0.29) (0.30)
-------- -------- -------- -------- -------- -------- ------- ------
Net change
in net
asset value
per
share...... 0.12 (0.62) 3.55 3.74 (0.40) 0.41 1.69 0.48
-------- -------- -------- -------- -------- -------- ------- ------
NET ASSET
VALUE PER
SHARE, END
OF
PERIOD..... $ 24.14 $ 24.02 $24.64 $21.09 $17.35 $17.75 $ 17.34 $15.65
======== ======== ======== ======== ======== ======== ======= ======
Total
Return..... 14.58%++ 11.64% 27.42% 33.37% 6.95% 2.42%+ 12.74%++ 5.16%
RATIO/SUPPLEMENTAL
DATA:
Net assets,
end of
period
(millions)... $ 319 $ 272 $ 274 $ 206 $ 151 $ 133 $ 123 $ 96
Ratio of
expenses
to average
net
assets.... 0.96%+ 0.89% 0.92% 0.95% 0.82% 0.95%+ 0.95%+ 0.95%
Ratio of
net
investment
income to
average
net
assets.... 0.87%+ 1.07% 1.37% 1.53% 1.64% 1.28%+ 1.91%+ 2.08%
Ratio of
expenses
to average
net
assets*... 1.20%+ 1.57% 1.55% 1.54% 1.62% 1.88%* 0.95%+ 0.95%
Ratio of
net
investment
income to
average
net
assets*... 0.63%+ 0.39% 0.74% 0.94% 0.84% 0.35%* 1.91%+ 2.08%
Portfolio
turnover
rate...... 35% N/A N/A N/A N/A N/A 4% 27%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(a) 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.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
36
<PAGE> 40
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD
AUGUST 31, ------------------------------------------ ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(b) 1996 1995 1994(a)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR....... $ 9.54 $ 9.75 $ 9.44 $ 9.81 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income............................. 0.24 0.52 0.59 0.59 0.08
Net realized and unrealized gain (loss) on
investment transactions......................... 0.09 (0.15) 0.33 (0.37) (0.19)
-------- -------- -------- -------- --------
Total income (loss) from investment operations..... 0.33 0.37 0.92 0.22 (0.11)
-------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income.......................................... (0.24) (0.52) (0.59) (0.59) (0.08)
Dividends to shareholders from net realized gains
on investment transactions...................... (0.03) (0.06) (0.02) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions.................. (0.27) (0.58) (0.61) (0.59) (0.08)
-------- -------- -------- -------- --------
Net change in net asset value per share............ 0.06 (0.21) 0.31 (0.37) (0.19)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD........... $ 9.60 $ 9.54 $ 9.75 $ 9.44 $ 9.81
======== ======== ======== ======== ========
Total return (excludes sales charge)............... 3.52%++ 3.92% 10.45% 2.27% (1.10%)++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)................. $ 35,306 $ 22,937 $ 13,179 $ 1,964 $ 356
Ratio of expenses to average net assets........... 0.83%+ 0.75% 0.27% 0.00% 0.00%+
Ratio of net investment income to average net
assets.......................................... 5.62%+ 5.45% 6.13% 6.43% 5.70%+
Ratio of expenses to average net assets*.......... 1.16%+ 2.26% 5.00% 17.95% 160.20%+
Ratio of net investment income (loss) to average
net assets*..................................... 5.29%+ 3.94% 1.40% (11.52%) (154.50%)+
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
+ Annualized.
++ Not Annualized.
(a) Period from January 13, 1994 (inception date) to February 28, 1994.
(b) As of July 22, 1996 the Fund designated the existing series of shares as "A"
shares.
See Notes to Financial Statements.
37
<PAGE> 41
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
AUGUST 31, ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (a)
-------------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR........................... $ 9.54 $ 9.53
------ ------
Income from Investment Operations:
Net investment income................................................. 0.22 0.31
Net realized and unrealized gain on investments....................... 0.08 0.07
------ ------
Total income from investment operations............................... 0.30 0.38
------ ------
Less Dividends and Distributions:
Dividends to shareholders from net investment income.................. (0.22) (0.31)
Distributions to shareholders from net realized gains on
investments......................................................... (0.03) (0.06)
------ ------
Total Dividends and Distributions...................................... (0.25) (0.37)
------ ------
Net change in net asset value per share................................ 0.05 0.01
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD............................... $ 9.59 $ 9.54
====== ======
Total return........................................................... 3.16%(c) 3.73%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)..................................... $ 415 $ 332
Ratio of expenses to average net assets............................... 1.32%(b) 1.43%(b)
Ratio of net investment income to average net assets.................. 5.12%(b) 5.41%(b)
Ratio of expenses to average net assets*.............................. 1.66%(b) 2.71%(b)
Ratio of net investment income to average net assets*................. 4.78%(b) 4.13%(b)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Annualized.
(c) Non annualized.
See Notes to Financial Statements.
38
<PAGE> 42
THIS PAGE INTENTIONALLY LEFT BLANK
39
<PAGE> 43
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
--------------------------
JUNE 23, MARCH 1,
1997 THROUGH 1997 THROUGH YEAR ENDED
AUGUST 31, JUNE 22, ----------------------------------------
1997 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR............... $10.73 $10.70 $10.87 $10.48 $11.00
------- ------ ------ ------ ------
Income from Investment
Operations:
Net investment income........... 0.12 0.15 0.57 0.64 0.61
Net realized and unrealized
gain(loss) on investment
transactions.................. -- 0.08 (0.18) 0.39 (0.46)
------- ------ ------ ------ ------
Total income (loss) from
investment operations........... 0.12 0.23 0.39 1.03 0.15
Less Dividends and Distributions:
Dividends to shareholders from
net investment income......... (0.11) (0.16) (0.56) (0.64) (0.61)
Distributions to shareholders
from net realized gains....... -- (0.04) -- -- (0.06)
------- ------ ------ ------ ------
Total Dividends and
Distributions................... (0.11) (0.20) (0.56) (0.64) (0.67)
------- ------ ------ ------ ------
Net change in net asset value per
share........................... 0.01 0.03 (0.17) 0.39 (0.52)
------- ------ ------ ------ ------
NET ASSET VALUE PER SHARE, END OF
PERIOD.......................... $10.74 $10.73 $10.70 $10.87 $10.48
======= ====== ====== ====== ======
Total Return..................... 3.31%++ 2.04%++ 3.74% 9.90% 1.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions).................... $ 36 $ 37 $ 39 $ 47 $ 56
Ratio of expenses to average net
assets........................ 0.95%+ 0.94% 0.95% 0.95% 0.83%
Ratio of net investment income
(loss) to average net
assets........................ 5.62%+ 5.41% 5.21% 5.74% 5.64%
Ratio of expenses to average net
assets*....................... 1.20%+ 1.55% 1.45% 1.56% 1.41%
Ratio of net investment income
to average net assets*........ 5.37%+ 4.80% 4.71% 5.13% 5.06%
Portfolio turnover rate......... 59% N/A N/A N/A N/A
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
++ Not Annualized.
+ Annualized.
(a) Represents activity of the Fund prior to its reorganization from the
Intermediate Bond Fund of Collective Investment Trust for Severest
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.
See Notes to Financial Statements.
40
<PAGE> 44
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-----------------------------
DECEMBER 6, JANUARY 1,
1993 THROUGH 1993 THROUGH YEAR ENDED
FEBRUARY 28, DECEMBER 5, DECEMBER 31,
1994 1993(a) 1992(a)
------------ ------------ ------------
<S> <C> <C>
$11.14 $10.99 $11.01
------ ------ ------
0.12 0.58 0.67
(0.14) 0.15 (0.02)
------ ------ ------
(0.02) 0.73 0.65
(0.12) (0.58) (0.67)
-- -- --
------ ------ ------
(0.12) (0.58) (0.67)
------ ------ ------
(0.14) 0.15 (0.02)
------ ------ ------
$11.00 $11.14 $10.99
====== ====== ======
(0.23)%++ 6.80%++ 6.04%
$ 77 $ 83 $ 74
0.95%+ 0.95%+ 0.95%
4.38%+ 5.60%+ 6.15%
1.79%+ 0.95%+ 0.95%
3.54%+ 5.60%+ 6.15%
N/A 95% 154%
</TABLE>
41
<PAGE> 45
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COMMON STOCK -- 96.7%
AEROSPACE/DEFENSE -- 2.7%
General Dynamics Corp. ............................................. 28,900 $ 2,301,163
Lockheed Martin Corp. .............................................. 52,700 5,464,331
United Technologies Corp. .......................................... 106,900 8,344,881
------------
16,110,375
------------
AIRLINES -- 0.3%
U.S. Air Group, Inc.** ............................................. 45,800 1,562,925
------------
AUTOMOBILE MANUFACTURERS -- 1.8%
Ford Motor Co. ..................................................... 144,300 6,204,900
General Motors Corp. ............................................... 72,700 4,561,925
------------
10,766,825
------------
AUTOMOBILE PARTS -- 0.6%
Dana Corp. ......................................................... 76,100 3,505,356
------------
BEVERAGES -- 2.9%
Coca-Cola Co. ...................................................... 204,400 11,714,675
PepsiCo, Inc. ...................................................... 166,100 5,979,600
------------
17,694,275
------------
BUILDING RELATED -- 0.4%
Centex Corp. ....................................................... 47,600 2,588,250
------------
CHEMICALS -- 3.0%
Air Products & Chemicals, Inc. ..................................... 61,600 5,024,250
DuPont, (E.I.) de Nemours & Co. .................................... 202,600 12,624,512
------------
17,648,762
------------
CLOTHING & APPAREL -- 0.5%
VF Corp. ........................................................... 34,100 3,013,587
------------
COMPUTER HARDWARE -- 5.3%
Compaq Computer Corp.** ............................................ 169,750 11,118,625
Dell Computer Corp.** .............................................. 110,400 9,059,700
International Business Machines Corp. .............................. 64,000 6,456,000
Sun Microsystems, Inc.** ........................................... 105,200 5,049,600
------------
31,683,925
------------
COMPUTER SERVICES & SOFTWARE -- 3.8%
Microsoft Corp.** .................................................. 136,600 18,056,813
Oracle Corp.** ..................................................... 121,650 4,637,906
------------
22,694,719
------------
CONSUMER PRODUCTS & SERVICES -- 3.7%
Avon Products, Inc. ................................................ 92,000 5,893,750
Philip Morris Cos., Inc. ........................................... 241,800 10,548,525
Texas Instruments, Inc. ............................................ 51,200 5,817,600
------------
22,259,875
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 2.7%
General Electric Co. ............................................... 260,200 16,262,500
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 46
<TABLE>
<S> <C> <C>
ENTERTAINMENT & LEISURE -- 1.9%
Hasbro, Inc. ....................................................... 103,450 $ 2,780,219
King World Productions, Inc. ....................................... 55,600 2,210,100
Walt Disney Co. .................................................... 81,478 6,258,529
------------
11,248,848
------------
FINANCIAL -- BANK & TRUST -- 9.3%
Barnett Banks, Inc. ................................................ 113,100 7,704,937
Bankers Trust New York Corp. ....................................... 49,300 5,114,875
Chase Manhattan Corp. .............................................. 36,000 4,002,750
Citicorp ........................................................... 38,200 4,875,275
Comerica, Inc. ..................................................... 51,500 3,646,844
First Union Corp. .................................................. 178,600 8,583,962
Fleet Financial Group, Inc. ........................................ 98,900 6,372,869
Mellon Bank Corp. .................................................. 141,200 6,795,250
NationsBank Corp. .................................................. 64,900 3,853,437
State Street Corp. ................................................. 88,600 4,418,925
------------
55,369,124
------------
FINANCIAL SERVICES -- 1.4%
Morgan Stanley Dean Witter Discover & Co. .......................... 173,200 8,335,250
------------
FOOD -- 3.4%
American Stores Co. ................................................ 219,300 5,194,669
Conagra, Inc. ...................................................... 85,600 5,505,150
Hershey Foods Corp. ................................................ 62,300 3,325,262
Kellogg Co. ........................................................ 37,200 1,664,700
Sara Lee Corp. ..................................................... 112,400 4,524,100
------------
20,213,881
------------
HEALTHCARE SERVICES -- 1.0%
Tenet Healthcare Corp.** ........................................... 218,200 5,945,950
------------
HOUSEHOLD PRODUCTS -- 2.6%
Clorox Co. ......................................................... 37,000 4,856,250
Procter & Gamble Co. ............................................... 80,700 10,738,144
------------
15,594,394
------------
HOTELS & MOTELS -- 0.6%
Marriott Corp.** ................................................... 54,700 3,640,969
------------
INSURANCE -- 4.8%
Allstate Corp. ..................................................... 70,197 5,128,768
CIGNA Corp. ........................................................ 38,600 7,078,275
Conseco, Inc. ...................................................... 138,900 5,972,700
General Re Corp. ................................................... 19,200 3,722,400
Travelers Group, Inc. .............................................. 104,100 6,610,350
------------
28,512,493
------------
MACHINERY & EQUIPMENT -- 1.7%
Caterpillar, Inc. .................................................. 67,000 3,890,188
Ingersoll Rand Co. ................................................. 48,200 2,898,025
Parker Hannifin Corp. .............................................. 48,200 3,099,863
------------
9,888,076
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.7%
Abbot Laboratories ................................................. 66,800 4,003,825
Johnson & Johnson Co. .............................................. 165,800 9,398,787
U.S. Surgical Corp. ................................................ 77,800 2,562,538
------------
15,965,150
------------
METALS & MINING -- 1.3%
Phelps Dodge Corp. ................................................. 54,800 4,407,975
USX -- U.S. Steel Group, Inc. ...................................... 93,800 3,294,725
------------
7,702,700
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 47
<TABLE>
<S> <C> <C>
MULTI-INDUSTRY -- 2.3%
Dover Corp. ........................................................ 59,600 $ 4,116,125
Tyco International Ltd. ............................................ 117,500 9,216,406
------------
13,332,531
------------
OIL (DOMESTIC) -- 1.8%
Phillips Petroleum Co. ............................................. 110,600 5,260,413
USX -- Marathon Group .............................................. 170,400 5,548,650
------------
10,809,063
------------
OIL (INTERNATIONAL) -- 5.8%
Chevron Corp. ...................................................... 109,100 8,448,431
Exxon Corp. ........................................................ 201,100 12,304,806
Mobil Corp. ........................................................ 102,900 7,485,975
Royal Dutch Petroleum Co. .......................................... 116,400 5,907,300
------------
34,146,512
------------
OIL & GAS -- 1.2%
Schlumberger, Ltd. ................................................. 96,000 7,314,000
------------
PAPER & FOREST PRODUCTS -- 1.1%
James River Corp. of Virginia** .................................... 110,500 4,641,000
Weyerhaeuser Co. ................................................... 36,400 2,102,100
------------
6,743,100
------------
PHARMACEUTICALS -- 6.6%
Bristol-Meyers ..................................................... 113,800 8,648,800
Lilly, (Eli) & Co. ................................................. 57,100 5,974,088
Merck & Co., Inc. .................................................. 142,400 13,074,100
Schering-Plough Corp. .............................................. 161,700 7,761,600
Warner-Lambert Co. ................................................. 31,300 3,977,056
------------
39,435,644
------------
PRINTING & PUBLISHING -- 0.9%
McGraw-Hill Cos., Inc. ............................................. 43,400 2,660,963
New York Times Co. ................................................. 52,700 2,490,075
------------
5,151,038
------------
SEMI-CONDUCTORS -- 2.6%
Applied Materials, Inc.** .......................................... 43,600 4,114,750
Motorola, Inc. ..................................................... 150,300 11,028,262
------------
15,143,012
------------
RAILROADS -- 1.0%
Burlington Northern Santa Fe ....................................... 61,700 5,657,119
------------
RETAIL & MERCHANDISING -- 4.0%
CUC International, Inc. ............................................ 194,100 4,561,350
Dayton Hudson Corp. ................................................ 47,400 2,701,800
Home Depot, Inc. ................................................... 208,900 9,857,469
TJX Companies, Inc. ................................................ 233,000 6,407,500
------------
23,528,119
------------
TELECOMMUNICATIONS -- 2.5%
3Com Corp.** ....................................................... 91,400 4,564,288
Lucent Technologies, Inc. .......................................... 66,000 5,139,750
Tellabs, Inc.** .................................................... 86,000 5,133,125
------------
14,837,163
------------
UTILITIES -- GAS -- 0.7%
Pacific Enterprises ................................................ 116,900 3,850,394
------------
UTILITIES -- ELECTRIC -- 2.3%
FPL Group, Inc. .................................................... 147,300 6,849,450
GPU, Inc. .......................................................... 200,300 6,735,087
------------
13,584,537
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 48
<TABLE>
<S> <C> <C>
UTILITIES -- TELEPHONE -- 5.5%
Ameritech Corp. .................................................... 110,400 $ 6,920,700
Bell Atlanta Corp. ................................................. 105,522 7,637,126
BellSouth Corp. .................................................... 176,300 7,757,200
U.S. WEST Communications Group ..................................... 106,000 3,796,125
WorldCom, Inc.** ................................................... 210,300 6,295,856
------------
32,407,007
------------
TOTAL COMMON STOCK (COST $465,960,052) .............................. 574,147,448
------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
---- -------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
U.S. Treasury Bill (Cost $995,248)............. 5.31% 10/02/97 $1,000,000 995,248
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 3.0%
Temporary Investment Fund (Cost $17,766,052) ........................ 17,766,052 17,766,052
------------
TOTAL INVESTMENTS -- 99.8% (COST $484,721,532)(A)................................. 592,908,748
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%..................................... 920,282
------------
NET ASSETS -- 100.0%.............................................................. $593,829,030
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $593,829,030.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................ $111,454,572
Unrealized depreciation................................ (3,267,356)
------------
Net unrealized appreciation............................ $108,187,216
============
</TABLE>
* Effective Yield.
** Non-income producing security.
Schedule of Open Financial Futures Contracts Purchased
<TABLE>
<CAPTION>
NET UNREALIZED
EXPIRATION NUMBER OF CONTRACT APPRECIATION
DATE CONTRACTS CONTRACTS VALUE OF CONTRACTS
- ---------- --------- ------------------------ ----------- --------------
<S> <C> <C> <C> <C>
9/19/97 30 S&P 500 -- September 1997 $13,546,500 $ 49,500
========
</TABLE>
See Notes to Financial Statements.
45
<PAGE> 49
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
S&P/MOODY'S MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ------------- ----- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- 12.8%
AESOP Funding II Series 1997-I, Class
A1................................... Aaa/AAA 6.22% 10/20/01 $2,000,000 $ 1,997,813
Citibank Credit Card Master Trust I
(ZCB)................................ Aaa/AAA 0.00% 08/15/06 2,000,000 1,247,730
Contimortgage Home Equity Loan........ AAA/Aaa 6.60% 10/15/11 2,000,000 1,984,562
Contimortgage Home Equity Loan Trust
1997-3 A5............................ AAA/Aaa 7.01% 08/15/13 2,000,000 2,015,625
Standard Credit Card Master Trust
Series 1995-3, Class A............... AAA/Aaa 7.85% 02/07/02 2,500,000 2.590,613
The Money Store Home Equity Trust
Series 1996-B........................ AAA/Aaa 7.38% 05/15/17 1,000,000 1,019,222
The Money Store, Series 1997-B A5..... AAA/Aaa 6.83% 07/15/21 2,500,000 2,507,055
World Omni Automobile Lease
Securitization Trust, Series 1997-A,
Class A4............................. AAA/Aaa 6.90% 06/25/03 2,250,000 2,280,803
-----------
TOTAL ASSET BACKED SECURITIES (COST $15,684,499) 15,643,623
-----------
CORPORATE BONDS -- 28.2%
Aetna Services Inc.................... A2/A 6.76% 08/15/01 5,500,000 5,534,375
Bear Steams Co........................ A2/A 6.50% 07/05/00 2,000,000 2,002,500
Finova Capital Corp................... Baa 1/A- 6.63% 09/15/01 3,500,000 3,482,500
Ford Motor Credit Co.................. A1/A+ 5.75% 01/25/01 2,000,000 1,955,000
General Motors Acceptance Corp........ A3/A- 7.13% 05/01/01 3,950,000 4,014,187
General Motors Acceptance Corp........ A3/A- 6.88% 07/15/01 2,000,000 2,017,500
Hartford Life, Inc.................... A2/A 6.90% 06/15/04 3,000,000 3,003,750
International Lease Finance Corp...... A1/A+ 6.88% 05/01/01 4,000,000 4,040,000
Merrill Lynch & Co., Inc.............. Aa3/AA- 6.00% 01/15/01 2,000,000 1,970,000
Morgan Stanley Debentures............. A1/A+ 9.38% 06/15/01 4,165,000 4,550,263
Waste Management Inc.................. A3/A- 6.63% 07/15/02 2,000,000 1,990,000
-----------
TOTAL CORPORATE BONDS (COST $34,296,226) 34,560,075
-----------
MEDIUM TERM NOTES -- 19.5%
Associates Corp. of North America
Underwritten Senior Notes............ Aa3/AA- 6.75% 07/15/01 4,100,000 4,125,625
Fuji Bank............................. A3/NR 7.30% 03/29/49 3,000,000 3,018,217
Ikon Capital Inc...................... A3/A- 6.73% 06/15/01 2,500,000 2,503,125
McDonnel Douglas Financial Corp....... A2/AA 6.83% 05/21/01 4,000,000 4,035,000
NationsBank Corp...................... A1/A+ 6.09% 12/14/01 5,000,000 4,887,500
Paine Webber Group, Series C.......... Baa1/BBB+ 7.31% 08/09/00 3,000,000 3,048,750
Sears Roebuck Acceptance Corp......... A2/A- 7.00% 06/15/07 2,200,000 2,202,750
-----------
TOTAL MEDIUM TERM NOTES (COST $23,734,148) 23,820,967
-----------
</TABLE>
See Notes to Financial Statements.
46
<PAGE> 50
<TABLE>
<CAPTION>
MATUITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ----- --------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.7%
Federal Home Loan Mortgage Corp. Pool
#160034.............................. 8.50% 12/01/07 $ 56,471 $ 59,418
Federal Home Loan Mortgage Corp. Pool
#284343.............................. 8.00% 12/01/16 7,863 8,141
Federal Home Loan Mortgage Corp. Pool
#297505.............................. 8.00% 06/01/17 17,628 18,349
Federal Home Loan Mortgage Corp. Pool
#549837.............................. 8.00% 07/01/10 173,389 180,433
Federal Home Loan Mortgage Corp.
Series #1501 Class G................. 6.40% 05/15/18 2,300,000 2,288,621
Federal National Mortgage Association
Pool #131579......................... 6.50% 07/01/04 114,533 110,489
Federal National Mortgage Association
Pool #286087......................... 9.00% 06/01/24 675,990 697,748
Fncx ppl #303528...................... 6.00% 06/01/01 1,963,425 1,921,089
Government National Mortgage
Association Pool #136688............. 10.00% 09/15/15 25,611 28,432
Government National Mortgage
Association Pool #166744............. 10.00% 07/15/16 258,911 285,207
Government National Association Pool
#209480.............................. 10.00% 07/15/17 78,783 86,785
Government National Mortgage
Association Pool #227082............. 10.00% 08/15/17 111,361 122,671
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.......................... 5,807,383
-----------
U.S. TREASURY OBLIGATIONS -- 32.5%
U.S. Treasury Notes................... 7.75% 01/31/00 18,500,000 19,195,043
U.S. Treasury Notes................... 5.63% 02/28/01 2,700,000 2,656,044
U.S. Treasury Notes................... 5.88% 06/30/00 10,000,000 9,948,999
U.S. Treasury Notes................... 7.00% 07/15/06 7,705,453 7,947,062
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$38,022,147)......................... 39,747,148
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
----------
<S> <C> <C>
TEMPORARY INVESTMENTS -- 2.4%
Temporary Investment Cash Fund........ $1,458,382 $ 1,458,382
Temporary Investment Fund............. 1,466,382 1,466,382
-----------
TOTAL TEMPORARY INVESTMENTS (COST $2,924,766) 2,924,764
-----------
TOTAL INVESTMENTS -- 100.1% (COST $121,839,254)(a) 122,504,493
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1)% (166,158)
-----------
NET ASSETS -- 100.0%.................. $122,338,335
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $122,338,335.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................................... $ 843,444
Unrealized depreciation...................................................... (178,205)
----------
Net unrealized depreciation.................................................. $ 665,239
===========
</TABLE>
(ZCB) Zero Coupon Bond
See Notes to Financial Statements.
47
<PAGE> 51
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $484,721,532).............. $592,908,748
Dividend Receivable................................................. 1,014,093
Interest Receivable................................................. 72,165
Contribution receivable............................................. 1,439,225
Variation margin receivable on futures contract..................... 49,500
Deferred organization costs......................................... 17,313
Prepaid expenses.................................................... 48,594
------------
Total Assets.......................................................... 595,549,638
------------
LIABILITIES
Withdrawal payable.................................................. 1,142,882
Advisory fees payable............................................... 256,754
Administration fees payable......................................... 25,676
Audit fees payable.................................................. 26,732
Fund accounting fees and expense payable............................ 46,817
Custodian fees payable.............................................. 3,795
Legal fees payable.................................................. 15,914
Other accrued expenses.............................................. 202,038
------------
Total Liabilities..................................................... 1,720,608
------------
NET ASSETS............................................................ $593,829,030
============
</TABLE>
- ---------------
See Notes to Financial Statements.
48
<PAGE> 52
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $121,839,254)............. $122,504,493
Receivable for securities sold...................................... 2,672,703
Contribution receivable............................................. 297,651
Interest receivable................................................. 1,428,852
Deferred organization costs......................................... 17,243
Prepaid expenses.................................................... 12,014
------------
Total Assets.......................................................... 126,932,956
------------
LIABILITIES:
Withdrawal payable.................................................. 385,769
Payable for securities purchased.................................... 4,122,829
Advisory fees payable............................................... 15,191
Audit fees payable.................................................. 30,315
Fund accounting fees payable........................................ 10,020
Legal fees payable.................................................. 5,989
Administration fees payable......................................... 2,270
Other accrued expenses.............................................. 22,238
------------
Total Liabilities..................................................... 4,594,621
------------
NET ASSETS............................................................ $122,338,335
============
</TABLE>
- ---------------
See Notes to Financial Statements.
49
<PAGE> 53
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income...................................................... $ 4,613,845
Interest income...................................................... 429,249
-----------
Total income....................................................... 5,043,094
-----------
EXPENSES
Advisory fees........................................................ 1,754,959
Administration fees.................................................. 136,084
Fund accounting fees and expenses.................................... 140,530
Audit fees........................................................... 12,735
Custodian fees and expenses.......................................... 35,526
Legal fees........................................................... 22,373
Trustees' fees....................................................... 12,703
Amortization of organization costs................................... 6,992
Other expenses....................................................... 8,063
-----------
Total Expenses..................................................... 2,129,965
Less: Fee waivers and expense reimbursements......................... (279,642)
-----------
Total Net Expenses................................................... 1,850,323
-----------
Net Investment Income.................................................. 3,192,771
-----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions........................ 34,879,065
Net change in unrealized appreciation on investments and futures..... 35,352,626
-----------
Net realized/unrealized gains on investments and futures............... 70,231,691
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $73,424,462
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
50
<PAGE> 54
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest Income........................................................ $4,552,804
----------
EXPENSES:
Advisory fees.......................................................... 279,369
Administration fees.................................................... 35,656
Fund accounting fees and expenses...................................... 54,032
Amortization of organization costs..................................... 6,992
Audit fees............................................................. 16,650
Legal fees............................................................. 6,655
Directors fees......................................................... 3,566
Other operating expenses............................................... 10,017
----------
Total Expenses................................................... 412,937
Less: Fee waivers and reimbursements..................................... (156,639)
----------
Total Net Expenses....................................................... 256,298
----------
NET INVESTMENT INCOME.................................................... 4,296,506
----------
REALIZED/UNREALIZED (LOSSES) ON INVESTMENTS FROM MASTER INVESTMENT TRUST,
SERIES I -- INVESTMENT GRADE BOND PORTFOLIO:
Net realized losses on investment transactions......................... (405,757)
Net change in unrealized depreciation on investments................... 1,294,579
----------
Net realized / unrealized losses on investments........................ 888,822
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $5,185,328
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
51
<PAGE> 55
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Operations:
Net investment income.................................. $ 3,192,771 $ 5,845,867
Net realized gains on investment transactions.......... 34,879,065 62,491,398
Net change in unrealized appreciation on investments... 35,352,626 26,358,970
------------ ------------
Change in net assets resulting from operations......... 73,424,462 94,696,235
------------ ------------
Trust Share Transactions:
Contributions.......................................... 100,389,612 176,422,520
Withdrawals............................................ (56,551,614) (70,074,459)
------------ ------------
Change in net assets from trust share transactions....... 43,837,998 106,348,061
------------ ------------
Change in net assets..................................... 117,262,460 201,044,296
NET ASSETS
Beginning of Period.................................... 476,566,570 275,522,274
------------ ------------
End of Period.......................................... $593,829,030 $476,566,570
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
52
<PAGE> 56
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................. $ 4,296,506 $ 5,575,868
Net realized gain (loss) on investment
transactions.................................... (405,757) (535,492)
Net change in unrealized depreciation on
investments..................................... 1,294,579 (681,210)
------------ ------------
Change in net assets resulting from operations.... 5,185,328 4,359,166
------------ ------------
TRUST SHARE TRANSACTIONS:
Contributions..................................... 27,755,852 94,643,822
Withdrawals....................................... (49,759,764) (26,135,644)
------------ ------------
Change in net assets resulting from trust share
transactions...................................... (22,003,912) 68,508,178
------------ ------------
Change in net assets................................ (16,818,584) 72,867,344
NET ASSETS
Beginning of Period............................... 139,156,919 66,289,575
------------ ------------
End of Period..................................... $122,338,335 $ 139,156,919
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
53
<PAGE> 57
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
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, 1997, the Trust
consisted of two portfolios; the Blue Chip Portfolio (the "Blue Chip Portfolio")
and Investment Grade Bond Portfolio (the "Bond Portfolio") (collectively the
"Portfolios").
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 Government fixed income obligations and mortgage
backed securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, served as the Portfolio's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly owned subsidiary,
BISYS Fund Services, Limited Partnership served as the Portfolios'
administrator. Effective September 15, 1997, PFPC Inc., wholly owned subsidiary
of PNC Bank Corp., serves as administrator for the Trust.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
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 securities exchange on which such securities
are primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. 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 securi-
54
<PAGE> 58
ties 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.
FUTURES:
A futures contract is an agreement to purchase or sell a specified quantity
of an underlying instrument at a specified future date or to make or receive a
cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Upon entering into such a contract the Portfolio is required to pledge
to the broker an amount of cash and/or securities equal to the minimum "initial
margin" requirements of the exchange. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time when it was closed. The Portfolio invests
in futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest rates. The
use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets, and the possible inability of counterparties to meet the terms of
their contracts. The summary of open financial futures contracts at August 31,
1997 is included in the Blue Chip Portfolio's Schedule of Investments which is
included elsewhere in this report.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recorded on the ex-dividend date. Realized gains and
losses on securities transactions are determined on the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
FEDERAL INCOME TAXES:
The Portfolios will be treated as a partnership 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 require-
55
<PAGE> 59
ments 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 had an Administration Agreement with BISYS.
As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, which is accrued daily and
payable monthly, at an annual rate of 0.75% from March 1, 1997 through June 22,
1997, and 0.50% from June 23, 1997 through August 31, 1997 of the average daily
net assets of the Portfolios. For the six months ended August 31, 1997, Bank of
America waived $262,519, and $140,896 in fees as Adviser of the Blue Chip
Portfolio and Bond Portfolio.
As Administrator, BISYS assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, BISYS was
entitled to a fee which was accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the six months ended
August 31, 1997, BISYS waived $17,123 and $15,473 in fees as Administrator of
the Blue Chip Portfolio and Bond Portfolio.
For services provided to the portfolios constituting the Trust, each Trustee
receives an annual fee of $3,000 and a meeting fee of $500.
For the six months ended August 31, 1997, the Blue Chip Portfolio and Bond
Portfolio incurred legal expenses of $22,373 and $6,655, which were earned by a
law firm, a partner of which serves as Secretary of the Trust.
Certain officers of the Trust are affiliated with BISYS. Such persons are
not paid directly by the Trust for serving in these capacities.
NOTE 4 -- SECURITIES TRANSACTIONS
During the six months ended August 31, 1997, each Portfolio purchased and
sold portfolio securities, excluding short-term securities, in the following
amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
========= =========
<S> <C> <C>
Blue Chip Portfolio
Common Stocks $230,612,694 $181,509,424
Bond Portfolio
U.S. Government $ 48,542,025 $ 14,952,580
Other 30,379,434 80,454,007
------------ ------------
Total $ 78,921,459 $ 95,406,587
============ ============
</TABLE>
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Investment Grade Bond Portfolio had the following concentrations by
industry sector at August 31, 1997 (as a percentage of total investments):
<TABLE>
<S> <C>
Asset-Backed Securities............... 12.8
Corporate Bonds....................... 28.2
Medium Term Notes..................... 19.5
Temporary Investments................. 2.4
U.S. Government Agency Obligations.... 4.7
U.S. Treasury Notes................... 32.4
-----
100.0%
======
</TABLE>
56
<PAGE> 60
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994*
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net
assets............................... 0.75%** 0.62% 0.31% 0.17% 0.27%**
Ratio of net investment income to
average net assets................... 1.30%** 1.62% 2.16% 2.30% 1.97%**
Ratio of expenses to average net
assets(a)............................ 0.87%** 0.90% 0.90% 0.97% 1.07%**
Ratio of net investment income to
average net assets(a)................ 1.19%** 1.34% 1.57% 1.50% 1.17%**
Portfolio Turnover.................... 35% 91% 108% 44% 86%
Average Commission rate paid(b)....... $0.0506 $ 0.0530 -- -- --
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(b) 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.
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.
** Annualized.
57
<PAGE> 61
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX YEAR ENDED
MONTHS ENDED ------------------------------------------------------------
AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994*
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 0.36%** 0.35% 0.18% 0.25% 0.41%**
Ratio of net
investment income to
average net assets... 6.03%** 5.86% 6.47% 6.22% 4.93%**
Ratio of expenses to
average net
assets(a)............ 0.58%** 0.65% 0.68% 0.75% 0.91%**
Ratio of net
investment income to
average net
assets(a)............ 5.81%** 5.56% 5.97% 5.72% 4.43%**
Portfolio Turnover.... 59% 83% 172% 240% 32%
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
* For the period December 6, 1993 (commencement of operations) through February
28, 1994.
** Annualized.
58
<PAGE> 62
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 3.8%
DOMESTIC -- 3.2%
American Express Centurion Bank
Monthly Variable Rate (final
maturity 1/9/98)*.............. A1/P1 5.61% 09/09/97 $ 25,000,000 $ 24,999,318
American Express Centurion Bank
Monthly Variable Rate (final
maturity 4/15/98)*............. A1/P1 5.62% 09/15/97 50,000,000 50,000,000
American Express Centurion Bank
Monthly Variable Rate (final
maturity 6/26/98)*............. A1/P1 5.60% 09/26/97 25,000,000 25,000,000
Bank of New York................. A1/P1 6.10% 05/22/98 25,000,000 24,981,100
Huntington National Bank......... A1/P1 5.94% 08/31/98 50,000,000 49,971,415
PNC Bank, N.A., Monthly Variable
Rate (final maturity
10/01/97)*..................... A1/P1 5.52% 09/02/97 25,000,000 24,998,382
PNC Bank, N.A., Monthly Variable
Rate (final maturity
11/25/97)*..................... A1/P1 5.52% 09/25/97 50,000,000 49,963,450
--------------
TOTAL DOMESTIC BANK NOTES......... 249,913,665
--------------
FOREIGN -- 0.6%
Abbey National Treasury Services,
PLC............................ A1/P1 6.00% 06/17/98 50,000,000 49,997,726
--------------
TOTAL BANK NOTES (AMORTIZED COST
$299,911,391).................... 299,911,391
--------------
CERTIFICATE OF DEPOSIT -- 18.9%
DOMESTIC -- 5.0%
Bankers Trust Company, Daily
Variable Rate (final maturity
07/21/98)*..................... A1/P1 5.65% 09/02/97 25,000,000 24,989,321
Bankers Trust Company, Daily
Variable Rate (final maturity
9/30/97)*...................... A1/P1 5.62% 09/02/97 50,000,000 49,997,695
Bankers Trust Company, Weekly
Variable Rate (final maturity
10/16/97)*..................... A1/P1 5.50% 09/03/97 25,000,000 24,997,139
Bankers Trust Company, Weekly
Variable Rate (final maturity
12/10/97)*..................... A1/P1 5.56% 09/03/97 25,000,000 24,996,575
Bankers Trust Company, Weekly
Variable Rate (final maturity
07/07/98)*..................... A1/P1 5.66% 09/03/97 50,000,000 49,971,403
Crestar Bank..................... A1/P1 5.49% 09/19/97 25,000,000 25,000,000
Crestar Bank..................... A1/P1 5.63% 11/20/97 50,000,000 50,001,644
Crestar Bank..................... A1/P1 5.80% 04/08/98 50,000,000 50,000,000
Crestar Bank..................... A1/P1 5.86% 07/20/98 50,000,000 49,991,561
Morgan Guaranty Trust Company.... A1/P1 5.80% 07/28/98 25,000,000 24,991,346
Morgan Guaranty Trust Company.... A1/P1 5.87% 08/06/98 25,000,000 24,993,337
--------------
TOTAL DOMESTIC.................... 399,930,021
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
59
<PAGE> 63
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
EURO -- 0.9%
Sumitomo Bank, Ltd., London...... A1/P1 5.76% 10/15/97 $ 50,000,000 $ 50,000,602
Sumitomo Bank, Ltd., London...... A1/P1 5.77% 10/17/97 25,000,000 25,000,315
--------------
TOTAL EURO........................ 75,000,917
--------------
YANKEE -- 13.0%
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.85% 01/07/98 25,000,000 24,996,564
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.88% 01/13/98 25,000,000 24,998,244
Banque National de Paris,
Chicago........................ A1/P1 5.97% 07/01/98 25,000,000 24,984,140
Banque National de Paris,
Chicago........................ A1/P1 5.89% 07/21/98 25,000,000 24,993,240
Banque National de Paris,
Chicago........................ A1/P1 5.80% 07/31/98 25,000,000 24,989,085
Banque National de Paris, New
York........................... A1/P1 5.75% 02/26/98 25,000,000 24,994,054
BHF Bank of Aktiengesellschaft,
New York, Monthly Variable Rate
(final maturity 8/13/98)*...... A1/P1 5.56% 09/15/97 50,000,000 49,981,553
Canadian Imperial Bank of
Commerce, New York............. A1/P1 5.87% 08/11/98 25,000,000 24,980,849
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.83% 09/02/97 25,000,000 25,000,007
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.94% 12/16/97 55,500,000 55,511,349
Industrial Bank of Japan, New
York........................... A1/P1 5.94% 12/04/97 50,000,000 50,001,267
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/10/97 50,000,000 50,001,356
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/11/97 50,000,000 50,001,369
Istituto Bancario San Paolo Di
Torino, New York............... A1/P1 5.87% 07/20/98 50,000,000 49,987,345
Landesbank Hessen-Thuringen
Girozentrale, New York......... A1/P1 5.94% 06/19/98 25,000,000 24,988,570
National Australia Bank, New
York........................... A1/P1 5.80% 10/03/97 25,000,000 24,999,843
National Bank of Canada, New
York........................... A1/P1 6.15% 05/15/98 44,000,000 43,984,023
National Bank of Canada, New
York........................... A1/P1 6.14% 06/05/98 25,000,000 24,996,188
Royal Bank of Canada, New York... A1/P1 5.58% 12/11/97 25,000,000 24,991,983
Royal Bank of Canada, New York... A1/P1 5.65% 03/03/98 80,000,000 79,942,894
Societe Generale Bank, New York.. A1/P1 5.77% 01/09/98 25,000,000 24,996,590
Societe Generale Bank, New York.. A1/P1 5.59% 11/14/97 30,000,000 30,001,283
Societe Generale Bank, New York.. A1/P1 5.73% 10/15/97 15,000,000 15,002,168
Societe Generale Bank, New York.. A1/P1 5.77% 01/07/98 25,000,000 24,997,481
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 1/15/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,994,305
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 6/16/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,988,571
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 8/25/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,985,793
</TABLE>
- ---------------
See Notes to Financial Statements.
60
<PAGE> 64
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
YANKEE -- (CONTINUED)
Societe Generale Bank, New York,
Quarterly Variable Rate (final
maturity 12/24/97)*............ A1/P1 5.68% 09/24/97 $ 25,000,000 $ 24,994,534
Sumitomo Bank Ltd., New York..... A1/P1 5.60% 09/08/97 25,000,000 24,999,846
Westdeutsche Landes Bank Girozen
Trole, New York................ A1/P1 5.78% 07/31/98 35,000,000 34,992,741
Westpac Banking Corp., New
York........................... A1/P1 5.83% 01/22/98 25,000,000 24,998,125
Westpac Banking Corp., New
York........................... A1/P1 5.93% 08/12/98 25,000,000 24,990,964
--------------
TOTAL YANKEE...................... 1,034,266,324
--------------
TOTAL CERTIFICATE OF DEPOSIT
(AMORTIZED COST
$1,509,197,262).................. 1,509,197,262
--------------
COMMERCIAL PAPER -- 31.5%
DOMESTIC -- 26.9%
ASSET BACKED SECURITIES -- 9.3%
Aesop Funding Corp............... A1/P1 5.52% 09/19/97 33,300,000 33,208,092
Aesop Funding Corp............... A1/P1 5.52% 09/22/97 30,000,000 29,903,400
Aesop Funding Corp............... A1/P1 5.55% 10/02/97 40,000,000 39,808,833
Banc One Funding Corp............ A1/P1 5.53% 10/17/97 37,687,000 37,420,699
Beta Finance Inc................. A1/P1 5.53% 09/24/97 50,000,000 49,823,347
CC USA Inc....................... A1/P1 5.54% 11/05/97 21,500,000 21,284,940
CC USA Inc....................... A1/P1 5.55% 02/02/98 50,000,000 48,812,917
Corporate Asset Funding
Company........................ A1/P1 5.52% 10/17/97 50,000,000 49,647,333
Corporate Asset Funding
Company........................ A1/P1 5.54% 10/27/97 50,000,000 49,569,111
Enterprise Funding Corp. (b)..... A1/P1 5.52% 10/14/97 19,400,000 19,272,089
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 25,364,000 25,109,832
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 44,317,000 43,872,907
Golden Managers Acceptance
Corp........................... A1/P1 5.55% 09/19/97 45,000,000 44,875,125
Gotham Funding Corp.(b).......... A1/P1 5.70% 12/29/97 25,000,000 24,528,958
Riverwood Funding Corp........... A1/P1 5.52% 09/23/97 42,500,000 42,356,633
Riverwood Funding Corp........... A1/P1 5.52% 09/26/97 50,000,000 49,808,333
Sigma Finance Inc................ A1/P1 5.55% 10/14/97 50,000,000 49,668,542
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/04/97 35,000,000 34,655,911
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/05/97 50,000,000 49,500,764
--------------
TOTAL ASSET BACKED SECURITIES..... 743,127,766
--------------
AUTOMOBILES -- 3.5%
American Honda Finance Corp...... F1/P1 5.54% 10/22/97 30,000,000 29,764,550
American Honda Finance Corp...... F1/P1 5.55% 11/07/97 40,000,000 39,586,833
Daimler-Benz North America
Corp........................... A1/P1 5.61% 09/08/97 25,000,000 24,972,729
Daimler-Benz North America
Corp........................... A1/P1 5.51% 11/06/97 50,000,000 49,494,917
Daimler-Benz North America
Corp........................... A1/P1 5.52% 12/03/97 33,908,000 33,424,472
General Motors Acceptance Corp... P1/D1 5.40% 09/12/97 50,000,000 49,917,500
General Motors Acceptance Corp... P1/D1 5.82% 11/05/97 50,000,000 49,474,583
--------------
TOTAL AUTOMOBILES................. 276,635,584
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
61
<PAGE> 65
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANKING -- 3.3%
Bankers Trust, New York, Daily
Variable Rate (final maturity
11/7/97)*...................... A1/P1 5.72% 09/02/97 $ 25,000,000 $ 25,000,000
Bankers Trust, New York, Daily
Variable Rate (final maturity
1/9/98)*....................... A1/P1 5.74% 09/02/97 50,000,000 50,000,000
Svenska Handelsbanken, Inc....... A1/P1 5.52% 12/22/97 49,890,000 49,033,222
Unifunding, Inc.................. A1/P1 5.52% 10/20/97 36,000,000 35,729,520
Unifunding, Inc.................. A1/P1 5.55% 11/18/97 50,000,000 49,398,750
Unifunding, Inc.................. A1/P1 5.56% 12/11/97 50,000,000 49,220,056
--------------
TOTAL BANKING..................... 258,381,548
--------------
BROKERAGE SERVICES -- 3.1%
Lehman Brothers Holdings, Inc.... A1/F1 5.57% 09/19/97 50,000,000 49,860,750
Lehman Brothers Holdings, Inc.... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
Lehman Brothers Holdings, Inc.,
Weekly Variable Rate (final
maturity 4/03/98)*............. A1/F1 5.78% 09/08/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc......... A1/P1 5.53% 12/12/97 25,000,000 24,608,292
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Smith Barney Holdings, Inc....... A1/P1 5.52% 10/06/97 50,000,000 49,731,667
--------------
TOTAL BROKERAGE SERVICES.......... 247,466,716
--------------
CHEMICALS-DIVERSIFIED -- 0.2%
AKZO Nobel Inc................... A1/P1 5.62% 10/10/97 20,000,000 19,878,233
--------------
CONGLOMERATES -- 0.3%
B.A.T. Capital Corp.............. A1/P1 5.62% 09/03/97 25,000,000 24,992,194
--------------
CONSUMER NON-DURABLES -- 1.6%
Newell Co........................ A1/D1 5.54% 09/29/97 40,000,000 39,827,644
Newell Co........................ A1/D1 5.55% 10/29/97 50,000,000 49,552,917
Newell Co........................ A1/D1 5.56% 11/05/97 40,000,000 39,598,444
--------------
TOTAL CONSUMER NON-DURABLES....... 128,979,005
--------------
FINANCE COMPANIES -- 1.7%
Countrywide Home Loans, Inc...... A1/F1 5.63% 09/02/97 34,000,000 33,994,683
Countrywide Home Loans, Inc...... A1/F1 5.60% 09/19/97 25,000,000 24,930,000
Countrywide Home Loans, Inc...... A1/F1 5.52% 10/22/97 50,000,000 49,609,000
Countrywide Home Loans, Inc...... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
--------------
TOTAL FINANCE COMPANIES........... 133,229,204
--------------
INSURANCE -- 0.3%
Marsh & Mclennan Companies,
Inc............................ A1/P1 5.75% 02/20/98 28,000,000 27,230,778
--------------
PUBLISHING -- 0.6%
Tribune Company.................. A1/F1 5.55% 10/22/97 20,000,000 19,842,750
Tribune Company.................. A1/F1 5.65% 12/22/97 25,000,000 24,560,556
--------------
TOTAL PUBLISHING.................. 44,403,306
--------------
RELOCATION SERVICES -- 0.7%
PHH Corporation.................. A1/P1 5.58% 09/19/97 25,000,000 24,930,250
PHH Corporation.................. A1/P1 5.52% 10/31/97 35,000,000 34,678,000
--------------
TOTAL RELOCATION SERVICES......... 59,608,250
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
62
<PAGE> 66
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
SOVEREIGN ISSUES -- 0.6%
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 11/05/97 $ 29,500,000 $ 29,205,451
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 12/03/97 15,700,000 15,475,712
--------------
TOTAL SOVEREIGN ISSUES............ 44,681,163
--------------
UTILITIES -- 1.7%
Duke Capital Corp................ 5.56% 10/06/97 88,955,000 88,473,770
Edison International............. A1/P1 5.60% 10/22/97 50,000,000 49,603,333
--------------
TOTAL UTILITIES................... 138,077,103
--------------
TOTAL DOMESTIC COMMERCIAL PAPER... 2,146,690,850
--------------
FOREIGN -- 4.6%
AIR TRANSPORTATION -- 1.0%
BAA PLC.......................... A1/P1 5.53% 12/03/97 76,410,000 75,318,419
--------------
BUILDING SOCIETY -- 0.9%
Bradford & Bingley Building
Society........................ A1/P1 5.62% 12/29/97 50,000,000 49,071,139
Bradford & Bingley Building
Society........................ A1/P1 5.56% 02/17/98 25,000,000 24,347,472
--------------
TOTAL BUILDING SOCIETY............ 73,418,611
--------------
OIL AND GAS -- 0.5%
Repsol International Finance..... A1/P1 4.98% 09/09/97 40,000,000 39,950,222
--------------
SOVEREIGN ISSUES -- 1.6%
Cades............................ A1/P1 5.39% 10/03/97 50,000,000 49,760,667
Cades............................ A1/P1 5.41% 10/10/97 25,000,000 24,853,479
Cades............................ A1/P1 5.44% 11/14/97 50,000,000 49,440,889
--------------
TOTAL SOVEREIGN ISSUES............ 124,055,035
--------------
TELECOMMUNICATIONS -- 0.6%
Alcatel Alsthom, Inc............. A1/P1 5.60% 12/16/97 50,000,000 49,175,556
--------------
TOTAL FOREIGN COMMERCIAL PAPER.... 361,917,843
--------------
TOTAL COMMERCIAL PAPER (AMORTIZED
COST $2,508,608,693)............. 2,508,608,693
--------------
CORPORATE BOND -- 15.3%
ASSET BACKED SECURITIES -- 2.5%
CC USA, Inc...................... A1/P1 6.18% 05/26/98 20,000,000 20,002,393
Ciesco, L.P., Monthly Variable
Rate (final maturity
2/10/98)*...................... A1/P1 5.57% 09/12/97 75,000,000 74,996,671
Sigma Finance, Inc................ A1/P1 5.92% 03/05/98 50,000,000 49,991,984
Sigma Finance, Inc., Daily
Variable Rate (final maturity
7/27/98)*........................ A1/P1 5.68% 09/02/97 50,000,000 49,999,104
--------------
TOTAL ASSET BACKED SECURITIES..... 194,990,152
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
63
<PAGE> 67
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
AUTOMOBILES -- 2.3%
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/6/98)*.............. F1/P1 5.79% 10/06/97 $ 50,000,000 $ 49,994,265
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/9/98)*.............. F1/P1 5.75% 10/09/97 24,000,000 24,001,339
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 7/27/98)*............. F1/P1 5.72% 10/27/97 45,000,000 45,000,000
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 6/16/98)*............. F1/P1 5.81% 06/16/98 20,000,000 20,000,000
Ford Motor Credit Corp........... A1/P1 7.13% 12/01/97 25,000,000 25,089,658
General Motors Acceptance Corp.,
Quarterly Variable Rate (final
maturity 1/20/98)*............. F1/D1 5.82% 10/20/97 20,000,000 20,004,971
--------------
TOTAL AUTOMOBILES................. 184,090,233
--------------
BANKING -- 0.6%
Compagnie Bancaire USA Funding,
Daily Variable Rate (final
maturity 5/15/98)*............. A1/P1 5.79% 09/02/97 50,000,000 49,996,031
--------------
BROKERAGE SERVICES -- 4.5%
Bear Stearns Companies, Inc.,
Series B, Daily Variable Rate
(final maturity 3/17/98)*...... A1/P1 5.70% 09/02/97 75,000,000 75,000,000
Bear Stearns Companies, Inc.,
Series B, Monthly Variable Rate
(final maturity 4/1/98)*....... A1/P1 5.78% 09/02/97 18,000,000 18,015,439
C. S. First Boston, Inc., Daily
Variable Rate (final maturity
7/21/98)*...................... A1/P1 5.67% 09/02/97 50,000,000 50,000,000
C. S. First Boston, Inc., Weekly
Variable Rate (final maturity
5/15/98)*...................... A1/P1 5.61% 09/03/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
11/20/97)*..................... A1/P1 5.56% 09/03/97 50,000,000 49,997,874
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
1/29/98)*...................... A1/P1 5.59% 09/03/97 50,000,000 49,995,999
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
3/4/98)*....................... A1/P1 5.61% 09/03/97 19,000,000 18,985,204
Merrill Lynch & Co., Inc.,
Quarterly Variable Rate (final
maturity 11/13/97)*............ A1/P1 5.68% 11/13/97 50,000,000 49,997,008
--------------
TOTAL BROKERAGE SERVICES.......... 361,991,524
--------------
CONGLOMERATES -- 0.3%
Philip Morris Co., Inc............ A1/P1 9.00% 05/15/98 22,625,000 23,054,018
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
64
<PAGE> 68
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
FINANCE COMPANIES -- 2.1%
Associates Corp., North America.. A1/P1 6.63% 11/15/97 $ 20,000,000 $ 20,037,809
CIT Group Holdings, Inc.......... A1/P1 7.00% 09/30/97 29,700,000 29,728,947
Dean Witter Discover & Co........ A1/P1 6.00% 03/01/98 15,000,000 15,009,675
Household Finance Corp., Daily
Variable Rate (final maturity
5/28/98)*...................... A1/P1 5.72% 09/02/97 50,000,000 50,000,000
Household Finance Corp., Monthly
Variable Rate (final maturity
9/15/98)*...................... A1/P1 5.70% 09/15/97 50,000,000 50,043,350
--------------
TOTAL FINANCE COMPANIES........... 164,819,781
--------------
LEASING -- 1.8%
Sanwa Business Credit Corp.,
Daily Variable Rate (final
maturity 4/17/98)*............. P1/D1 5.84% 09/02/97 25,000,000 25,000,000
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 12/08/97)*............ P1/D1 5.80% 09/08/97 30,000,000 30,011,824
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 4/29/98)*............. P1/D1 5.76% 09/29/97 25,000,000 25,013,500
Sanwa Business Credit Corp.,
Quarterly Variable Rate (final
maturity 2/6/98)*.............. P1/D1 5.72% 11/06/97 25,000,000 24,998,918
USL Capital Corp., Series D,
Quarterly Variable Rate (final
maturity 4/22/98)*............... P1/F1 5.83% 10/22/97 34,000,000 34,022,741
--------------
TOTAL LEASING..................... 139,046,983
--------------
RELOCATION SERVICES -- 0.6%
PHH Corporation, Monthly Variable
Rate (final maturity
6/24/98)*...................... A1/P1 5.63% 09/24/97 50,000,000 50,000,000
--------------
RETAILING -- 0.6%
Sears Roebuck Acceptance Corp.... P1/F1 5.74% 10/02/97 50,000,000 49,999,569
--------------
TOTAL CORPORATE BOND (AMORTIZED
COST $1,217,988,291)............. 1,217,988,291
--------------
MASTER NOTE -- 7.5%
Goldman Sachs Group L.P. (final
maturity 1/16/98)*............. A1/P1 5.83% 09/02/97 300,000,000 300,000,000
Morgan Stanley Group, Inc. (final
maturity 3/24/98)*............. A1/P1 5.79% 09/02/97 300,000,000 300,000,000
--------------
TOTAL MASTER NOTE (AMORTIZED COST
$600,000,000).................... 600,000,000
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
65
<PAGE> 69
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(C) -- 23.6%
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $50,833,610
(Collateralized by $50,930,000
various U.S. Government
Obligations, 6.15%-7.55%,
1/27/00 -- 6/10/04, market
value -- $51,819,652)............ 5.60% 09/02/97 $ 50,802,000 $ 50,802,000
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $80,049,956
(Collateralized by $80,725,000
U.S. Government Obligations,
6.40%-6.50%, 5/2/01 -- 2/25/02,
market value -- $81,602,028)..... 5.62% 09/02/97 80,000,000 80,000,000
First Chicago Capital Markets,
Inc., dated 8/29/97, with a
maturity value of $150,093,833
(Collateralized by $157,483,000
various U.S. Government
Obligations, 0.00% -- 7.89%,
9/11/97 -- 8/15/03, market
value -- $153,001,916)........... 5.63% 09/02/97 150,000,000 150,000,000
First National Bank of Chicago,
dated 8/29/97, with a maturity
value of $50,031,278
(Collateralized by $51,390,000
Federal National Mortgage
Association Note, 7.02%, 8/28/07,
market value -- $51,004,575)..... 5.63% 09/02/97 50,000,000 50,000,000
Fuju Securities, Inc., dated
8/29/97, with a maturity value of
$300,187,000 (Collateralized by
$318,677,000 various U.S.
Government Obligations, 0.00% --
10.35%, 9/4/97 -- 8/15/26, market
value -- $306,000,902)........... 5.61% 09/02/97 300,000,000 300,000,000
HSBC Securities, Inc., dated
8/29/97, with a maturity value of
$350,218,556 (Collateralized by
$351,407,000 various U.S.
Government Obligations, 0.00%-
9.25%, 9/2/97 -- 6/15/07, market
value -- $357,001,503)........... 5.62% 09/02/97 350,000,000 350,000,000
Lehman Brothers, Inc., dated
8/29/97, with a maturity value of
$41,031,969 (Collateralized by
$69,764,000 U.S. Treasury Notes,
0.00%, 8/15/03 -- 11/15/08,
market value -- $41,828,863)..... 5.48% 09/02/97 41,007,000 41,007,000
</TABLE>
- ---------------
See Notes to Financial Statements.
66
<PAGE> 70
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
REPURCHASE AGREEMENTS(C) -- (CONTINUED)
<S> <C> <C> <C> <C> <C>
Merrill Lynch Securities, dated
8/29/97, with a maturity value of
$100,062,444 (Collateralized by
$115,399,948 Federal National
Mortgage Association Notes,
5.50% -- 9.00%, 3/1/03 -- 9/1/26,
market value -- $102,002,243).... 5.62% 09/02/97 $100,000,000 $ 100,000,000
NationsBanc, Inc., dated 8/29/97,
with a maturity value of
$230,143,750 (Collateralized by
$233,746,164 various U.S.
Government Obligations, 0.00% --
9.50%, 9/2/97 -- 8/1/27, market
value -- $234,600,486)........... 5.63% 09/02/97 230,000,000 230,000,000
Nomura Securities, Inc., dated
8/29/97, with a maturity value of
$200,124,667 (Collateralized by
$265,004,426 Government National
Mortgage Association Notes,
6.00% -- 10.00%,
1/1/00 -- 8/20/27, market
value -- $204,000,000)........... 5.61% 09/02/97 200,000,000 200,000,000
Prudential Securities, Inc., dated
8/29/97, with a maturity value of
$250,155,556 (Collateralized by
$324,844,908 various U.S.
Government Obligations, 0.00%-
10.00%, 1/15/98 -- 8/1/27, market
value -- $255,000,250)........... 5.60% 09/02/97 250,000,000 250,000,000
Smith Barney, Inc., dated 8/29/97,
with a maturity value of
$80,049,778 (Collateralized by
$117,897,650 various U.S.
Government Obligations,0.00% --
8.00%, 7/15/08 -- 2/1/27, market
value -- $81,600,397)............ 5.60% 09/02/97 80,000,000 80,000,000
--------------
TOTAL REPURCHASE AGREEMENT
(AMORTIZED COST
$1,881,809,000).................. 1,881,809,000
--------------
TOTAL INVESTMENTS -- 100.6%
(AMORTIZED COST
$8,017,514,637)(a)............... 8,017,514,637
--------------
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.6%)................. (45,980,584)
--------------
NET ASSETS -- 100.0%.............. $7,971,534,053
==============
</TABLE>
- ---------
Percentages indicated are based on net assets of $7,971,534,053.
(a) Cost for federal income tax and financial reporting purposes are
substantially the same.
(b) Private placement security.
(c) The range of coupon rates and maturity dates are shown.
PLC -- Public Liability Company.
N.R.S.R.O. Nationally Recognized Statistical Ratings Organization. Rating
agencies that are included within the N.R.S.R.O. category are: S&P,
Moody's, Fitch Investors Services, Duff & Phelps, IBCA, and Thomsons
Bank Watch.
A1 -- Highest rating assigned by S&P and IBCA.
P1 -- Highest rating assigned by Moody's.
F1 -- Highest rating assigned by Fitch Investors.
D1 -- Highest rating assigned by Duff.
TBW1 -- Highest rating assigned by Thomsons Bank Watch.
Note: S&P and Moody's ratings have been used, unless another service has
assigned the security a higher rating.
* Variable rate security. Maturity date reflects the next interest rate change
date.
See Notes to Financial Statements.
67
<PAGE> 71
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (amortized cost $6,135,705,637).................... $6,135,705,637
Repurchase agreements (cost $1,881,809,000)............................................ 1,881,809,000
Cash................................................................................... 26,337
Interest Receivable.................................................................... 41,624,568
Receivable for capital shares sold..................................................... 184,015,784
Receivable for investment securities sold.............................................. 2,083,305,000
Prepaid expenses....................................................................... 1,290,198
--------------
Total Assets....................................................................... 10,327,776,524
--------------
LIABILITIES:
Dividends payable...................................................................... 35,043,189
Payable for investment securities purchased............................................ 1,981,823,530
Payable for capital shares redeemed.................................................... 335,925,601
Investment advisory fees payable....................................................... 602,283
Administration fees payable............................................................ 660,579
Special management fees payable (Pacific Horizon Shares)............................... 617,556
Shareholder service fees payable (Horizon Service Shares).............................. 661,706
Shareholder service fees payable (S Shares)............................................ 27,167
Shareholder service fees payable (X Shares)............................................ 98,980
Shareholder service fees payable (Y Shares)............................................ 3,830
12b-1 fees payable (X Shares).......................................................... 100,240
12b-1 fees payable (Y Shares).......................................................... 11,489
Custodian and fund accounting fees payable............................................. 146,903
Transfer agent fees payable............................................................ 27,764
Other accrued expenses................................................................. 491,654
--------------
Total Liabilities.................................................................. 2,356,242,471
--------------
NET ASSETS............................................................................. $7,971,534,053
==============
Net Assets:
Pacific Horizon Shares................................................................. $2,257,973,852
Horizon Shares......................................................................... 2,021,874,087
Horizon Service Shares................................................................. 3,129,562,849
S Shares............................................................................... 118,539,347
Y Shares............................................................................... 36,737,587
X Shares............................................................................... 406,846,331
--------------
Total.............................................................................. $7,971,534,053
==============
Shares Outstanding ($0.001 par value, 120 billion):
Pacific Horizon Shares.............................................................. 2,258,185,450
Horizon Shares...................................................................... 2,022,168,081
Horizon Service Shares.............................................................. 3,129,427,668
S Shares............................................................................ 118,538,233
Y Shares............................................................................ 36,737,583
X Shares............................................................................ 406,811,237
--------------
Total.............................................................................. 7,971,868,252
==============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE........................ $1.00
===
COMPOSITION OF NET ASSETS:
Shares of common stock, at par......................................................... $ 7,971,868
Additional paid-in capital............................................................. 7,963,495,319
Accumulated undistributed net investment income........................................ 3,514,158
Accumulated net realized losses on investment transactions............................. (3,447,292)
--------------
NET ASSETS, AUGUST 31, 1997............................................................ $7,971,534,053
==============
</TABLE>
- ---------------
See Notes to Financial Statements.
68
<PAGE> 72
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $209,184,808
------------
EXPENSES:
Investment advisory fees............................................. 3,360,652
Administration fees.................................................. 3,679,805
Special management fees (Pacific Horizon Shares)..................... 3,625,502
Shareholder service fees (Horizon Service Shares).................... 3,857,672
Shareholder service fees (S Shares).................................. 53,805
Shareholder service fees (X Shares).................................. 375,826
Shareholder service fees (Y Shares).................................. 3,907
12b-1 fees (S Shares)................................................ 16,388
12b-1 fees (X Shares)................................................ 450,991
12b-1 fees (Y Shares)................................................ 11,722
Custodian and fund accounting fees................................... 380,182
Transfer Agent fees.................................................. 162,342
Legal fees........................................................... 295,692
Other expenses....................................................... 683,860
------------
Total Expenses................................................. 16,958,346
Less: Fee waivers.................................................... --
Expenses paid by third parties......................................... --
------------
Total Net Expenses..................................................... 16,958,346
------------
NET INVESTMENT INCOME.................................................. 192,226,462
------------
NET REALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions........................ 22,846
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $192,249,308
============
</TABLE>
- ---------------
See Notes to Financial Statements.
69
<PAGE> 73
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
---------------- ----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................................. $ 192,226,462 $ 313,627,480
Net realized gains on investment transactions......................... 22,846 172,885
---------------- ----------------
Change in net assets resulting from operations........................ 192,249,308 313,800,365
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Pacific Horizon Shares................................................ (57,653,267) (110,595,534)
Horizon Shares........................................................ (46,310,824) (79,709,197)
Horizon Service Shares................................................ (79,626,947) (119,808,778)
S Shares.............................................................. (629,524)(b) --
Y Shares.............................................................. (70,391)(c) --
X Shares.............................................................. (7,329,789) (2,322,836)(a)
---------------- ----------------
Change in net assets from shareholder distributions.................... (191,620,742) (312,436,345)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares Issued........................................... 24,957,660,701 42,442,585,809
Dividends reinvested.................................................. 89,864,407 177,262,119
Cost of shares redeemed............................................... (24,227,328,843) (40,881,572,699)
---------------- ----------------
Change in net assets from capital share transactions................... 820,196,265 1,738,275,229
---------------- ----------------
Change in net assets................................................... 820,824,831 1,739,639,249
NET ASSETS
Beginning of Period................................................... 7,150,709,222 5,411,069,973
---------------- ----------------
End of Period......................................................... $ 7,971,534,053 $ 7,150,709,222
================ ================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
See Notes to Financial Statements.
70
<PAGE> 74
PACIF IC HORIZON PRIME FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. On August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Prime Fund (the
"Prime Fund").
The Prime Fund issues six classes of shares (Pacific Horizon Shares, Horizon
Shares, Horizon Services Shares, effective July 22, 1996, X Shares, S Shares
effective April 7, 1997 and effective July 10, 1997, Y Shares). Pacific Horizon
Shares have a Special Management Services Agreement/Plan while the Horizon
Service Shares have a Shareholder Services Plan. X, S and Y Shares each have a
Distribution and Services Plan.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Fund's administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Fund, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Fund's prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and
71
<PAGE> 75
distribution calculation services for the Fund. The Fund bear all fees and
expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the Fund.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Fund's transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund 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 estimates.
PORTFOLIO VALUATIONS:
The securities of the Prime Fund 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 Fund 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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Prime Fund records security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses from security transactions are recorded on an
identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of the fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
REPURCHASE AGREEMENT:
The Prime Fund'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, exceeds the repurchase
72
<PAGE> 76
price. In the event of the seller's default of the obligation to repurchase, the
Prime Fund 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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Prime Fund's net investment income is declared as a dividend daily, and
paid monthly, to shareholders of record at the close of business on record date.
Net realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains can be offset by
capital loss carryovers, such gains will not be distributed. Dividends and
distributions are recorded by the Prime Fund on the ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
------------- --------------
<S> <C> <C>
Prime Fund $ 2,742 $182,342
</TABLE>
FEDERAL INCOME TAXES:
It is the Prime Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute timely, all of its net investment company taxable income and net
capital gains to shareholders. Therefore, no federal income tax provision is
required.
At February 28, 1997, the Prime Fund had the following capital loss
carryovers:
<TABLE>
<CAPTION>
CAPITAL
LOSS EXPIRATION
FUND CARRYOVER DATE
- ---------------------- ---------- ----------
<S> <C> <C>
Prime Fund $ 744,962 2002
2,725,176 2003
----------
$3,470,138
==========
</TABLE>
To the extent that these carryovers are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders.
Addition-
73
<PAGE> 77
ally, during the year, the Prime Fund utilized $172,885 of its available capital
loss carryover to offset realized capital gains for Federal income tax purposes.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Prime Fund has an Investment Advisory Agreement with Bank of America.
For the six months ended August 31, 1997, the Fund had an Administration
Agreement with BISYS. Bank of America is entitled to a fee from the Prime Fund,
which is accrued daily and payable monthly, at an annual rate of 0.10% of each
Fund's first $3 billion of net assets, plus 0.09% of each Fund's next $2 billion
of net assets, plus 0.08% of each Fund's net assets in excess of $5 billion.
BISYS was entitled to a fee from the Prime Fund which is accrued daily and
payable monthly, at an annual rate of 0.10% of the Fund's first $7 billion of
net assets, plus 0.09% of the Fund's next $3 billion of net assets, plus 0.08%
of the Fund's net assets in excess of $10 billion.
The Prime Fund has entered into a Special Management Services Agreement (the
"Services Agreement") pursuant to which they agree to pay Bank of America and
BISYS 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 assets of the outstanding Pacific Horizon Shares of the Prime
Fund. Fees under the Services Agreement are borne solely by the Pacific Horizon
Shares.
Effective January 1997, the Services Agreement was terminated. The Prime
Fund has adopted a Special Management Services Plan (the "Services Plan")
pursuant to which Service Organizations agree to provide certain services to
their clients who are beneficial owners of Pacific Horizon Shares in return for
a payment by the Prime Fund of a fee at an annual rate 0.32% of the average
daily net assets of the outstanding Pacific Horizon Shares. Fees under the
Services Plan are borne solely by the Pacific Horizon Shares. Service
organizations include BISYS, Bank of America and its affiliates. For the six
months ended August 31, 1997, the Prime Fund was advised that BISYS, Bank of
America and their affiliates earned the following amounts pursuant to the
Services Agreement and Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES BISYS
------------------- -------------------
<S> <C> <C>
$3,346,248 $22,110
</TABLE>
The Prime Fund has also adopted a Shareholder Services Plan (the "Horizon
Services 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 Prime Fund of a fee at an annual rate of 0.25% of the
average daily net assets of the Horizon Service Shares, which 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, 1997, the Prime Fund was advised that BISYS, Bank of America and its
affiliates earned
74
<PAGE> 78
the following amounts pursuant to the Horizon Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES
------------------------------------------
<S> <C>
$3,166,103
</TABLE>
The Prime Fund has adopted the Distribution and Services Plan under which
the Prime Fund 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 Prime Fund's X Shares. For the six months ended August 31, 1997, the Prime
Fund was advised that Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES
------------------------------------------
<S> <C>
$374,472
</TABLE>
The Prime Fund has adopted the Distribution and Services Plan under which
the Prime Fund pays the Distributor and Service Organization for the provision
of support service with respect to the beneficial owners of Y shares. Payments
for distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%; respectively, of the average daily net assets of
the Prime Fund's Y shares. For the period from July 10, 1997 (date of inception)
to August 31, 1997, the Prime Fund was advised that Bank of America and its
affiliates earned the following amounts pursuant to the Distribution and
Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES
------------------------------------------
<S> <C>
$3,907
</TABLE>
The Prime Fund has adopted the Distribution and Services Plan under which
the Fund pays the Distributor and Service Organization for the provision of
support services with respect to the beneficial owners of S shares. Payments for
the distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%, respectively, of the average daily net assets of
the Prime Fund's S shares. For the period from April 7, 1997(date of inception)
to August 31, 1997 the Fund was advised that Bank of America and its affiliates
earned $31,874 pursuant to the Distribution and Services Plan.
BISYS Ohio served the Prime Fund as transfer agent and dividend disbursing
agent. In these capacities, BISYS Ohio earned $162,342, for the six months ended
August 31, 1997.
For the six months ended August 31, 1997, the Prime Fund incurred legal
charges totaling $295,692, which were earned by a law firm, a partner of which
serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
75
<PAGE> 79
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 Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a Director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. A Director who dies or
resigns after nine years of service as a Director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. In addition, the amount
payable each year to a Director who dies or resigns shall be increased by $1,000
for each year of service that the Director served as Chairman of the Board. Each
Director may receive any benefits payable under the Retirement Plan, at his or
her election, either in one lump sum payment or ten annual installments. A
Director's years of service for the purpose of calculating the payments
described above shall be based upon service as a Director or Chairman after
February 28, 1994. Aggregate costs pursuant to the Retirement Plan amounted to
$15,064, for the Prime Fund, for the six months ended August 31, 1997.
76
<PAGE> 80
NOTE 5 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Prime Fund (at $1.00 per share) for the
periods indicated are summarized below:
<TABLE>
<CAPTION>
PRIME FUND
-----------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
----------------- ------------------
<S> <C> <C>
Pacific Horizon Shares
Issued.................................. 1,421,450,092 4,320,031,345
Reinvest................................ 44,139,878 99,202,915
Redeemed................................ (1,500,161,348) (4,326,928,364)
------------- -------------
Net increase/ (decrease).................. (34,571,378) 92,305,896
============= =============
Horizon Shares
Issued.................................. 9,219,317,384 15,114,015,999
Reinvest................................ 13,412,109 25,723,399
Redeemed................................ (8,920,510,978) (15,081,065,299)
------------- -------------
Net increase/ (decrease).................. 312,218,515 58,674,099
============= =============
Horizon Service Shares
Issued.................................. 13,634,158,320 22,771,276,975
Reinvest.............................. 26,468,915 50,011,411
Redeemed.............................. (13,476,384,289) (21,437,775,542)
------------- -------------
Net increase/
(decrease).............................. 184,242,946 1,383,512,844
============= =============
X Shares
Issued.................................. 518,517,302 237,259,971
Reinvest................................ 5,573,041 2,324,394
Redeemed................................ (321,059,977) (35,803,494)
------------- -------------
Net increase.............................. 203,030,366 203,780,871(a)
============= =============
S Shares
Issued.................................. 122,180,115 --
Reinvest................................ 270,464 --
Redeemed................................ (3,912,346) --
------------- -------------
Net increase.............................. 118,538,233(b) --
============= =============
Y Shares
Issued.................................. 42,037,008 --
Reinvest................................ -- --
Redeemed................................ (5,299,425) --
------------- -------------
Net increase.............................. 36,737,583(c) --
============= =============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
77
<PAGE> 81
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income............. 0.0258 0.0492 0.0539 0.0424 0.0287 0.0340
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------ ------ ------ ------ ------ ------
Total income from investment
operations........................ 0.0258 0.0492 0.0543 0.0197 0.0271 0.0340
Less dividends to shareholders from
net investment income............. (0.0257) (0.0490) (0.0539) (0.0422) (0.0287) (0.0341)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------ ------ ------ ------ ------ ------
Net change in net asset value per
share............................. 0.0001 0.0002 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 $ 1.00
====== ====== ====== ====== ====== ======
Total return....................... 2.59%(d) 5.01% 5.53% 4.30%+ 2.91% 3.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)........................ $ 2,258 $ 2,292 $ 2,200 $ 1,129 $ 1,216 $ 992
Ratio of expenses to average net
assets............................ 0.55%(c) 0.55% 0.55% 0.51% 0.52% 0.55%
Ratio of net investment income to
average net assets................ 5.11%(c) 4.92% 5.37% 4.19% 2.86% 3.42%
Ratio of expenses to average net
assets*........................... (b) (b) 0.56% 0.56% 0.53% (a)
Ratio of net investment income to
average net assets*............... (b) (b) 5.36% 4.14% 2.85% (a)
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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
Advisor. Without this capital contribution, the total return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
</TABLE>
See Notes to Financial Statements.
78
<PAGE> 82
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0273 0.0524 0.0571 0.0461 0.0319 0.0372
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0232) (0.0016) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0273 0.0524 0.0575 0.0229 0.0303 0.0372
Less dividends to shareholders from
net investment income............. (0.0273) (0.0522) (0.0571) (0.0454) (0.0319) (0.0372)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- 0.0002 0.0004 0.0008 (0.0016) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.76%(d) 5.34% 5.86% 4.63%+ 3.24% 3.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 2,022 $ 1,710 $ 1,651 $ 662 $ 3,840 $ 10,301
Ratio of expenses to average net
assets.......................... 0.23%(c) 0.23% 0.23% 0.16% 0.20% 0.23%
Ratio of net investment income to
average net assets.............. 5.43%(c) 5.24% 5.69% 4.11% 3.19% 3.59%
Ratio of expenses to average net
assets*......................... (b) (b) 0.24% 0.23% 0.21% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.68% 4.04% 3.18% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
79
<PAGE> 83
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0261 0.0499 0.0546 0.0431 0.0294 0.0345
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0261 0.0499 0.0550 0.0204 0.0278 0.0345
Less dividends to shareholders from
net
investment income.................. (0.0260) (0.0497) (0.0546) (0.0429) (0.0294) (0.0347)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. 0.0001 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 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.63%(d) 5.08% 5.60% 4.37%+ 2.98% 3.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 3,130 $ 2,945 $ 1,561 $ 864 $ 839 $ 793
Ratio of expenses to average net
assets.......................... 0.48%(c) 0.48% 0.48% 0.44% 0.45% 0.48%
Ratio of net investment income to
average net assets.............. 5.18%(c) 5.00% 5.44% 4.31% 2.94% 3.49%
Ratio of expenses to average net
assets*......................... (b) (b) 0.49% 0.48% 0.46% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.43% 4.27% 2.93% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
80
<PAGE> 84
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income.............................. 0.0245 0.0282
Net realized gains/(losses) on investment
transactions..................................... -- --
-------- --------
Total income from investment operations.............. 0.0245 0.0282
Less dividends to shareholders from net investment
income............................................. (0.0245) (0.0281)
-------- --------
Net change in net asset value per share.............. -- 0.0001
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 1.00 $ 1.00
======== ========
Total return......................................... 2.48%(d) 2.84%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............. $ 407 $ 204
Ratio of expenses to average net assets............ 0.78%(c) 0.78%(c)
Ratio of net investment income to average net
assets........................................... 4.90%(c) 4.73%(c)
Ratio of expenses to average net assets*........... (b) (b)
Ratio of net investment income to average net
assets*.......................................... (b) (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
81
<PAGE> 85
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0197
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0197
Less dividends to shareholders from net investment
income................................................. (0.0197)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 119
Ratio of expenses to average net assets................ 0.78%(c)
Ratio of net investment income to average net assets... 4.94%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from April 7, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
82
<PAGE> 86
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
Y SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0065
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0065
Less dividends to shareholders from net investment
income................................................. (0.0065)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 37
Ratio of expenses to average net assets................ 1.23%(c)
Ratio of net investment income to average net assets... 4.50%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 10, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
83
<PAGE> 87
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
SEA-0014 10/97
<PAGE> 88
PACIFIC HORIZON MONEY MARKET FUNDS
FOR INSTITUTIONS
SEMI-ANNUAL REPORT
August 31, 1997
X Shares, Y Shares, Horizon Shares and
Horizon Service Shares
Prime Fund
Treasury Fund
Government Fund
Treasury Only Fund
Tax-Exempt Money Fund
California Tax-Exempt Money Market Fund
[PACIFIC HORIZON LOGO]
NOT FDIC INSURED
Provident Distributor, Inc., Distributor
PACIFIC HORIZON MONEY MARKET FUNDS FOR INSTITUTIONS
<PAGE> 89
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 90
Contents
<TABLE>
<S> <C>
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 2-3
.
. TAXABLE MONEY
. MARKET FUNDS
.
. Portfolios of Investments 4-18
.
. Statements of Assets
. and Liabilities 19
.
. Statements of Operations 20
.
. Statements of Changes
. in Net Assets 22-23
.
. Notes to Financial
. Statements 24-32
.
. Financial Highlights 33-49
.
. TAX-EXEMPT MONEY
. MARKET FUNDS
.
. Portfolios of Investments 50-68
.
. Statements of Assets
. and Liabilities 69
.
. Statements of Operations 70
.
. Statements of Changes
. in Net Assets 71
.
. Notes to Financial
. Statements 72-79
.
. Financial Highlights 80-87
</TABLE>
<PAGE> 91
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
2
<PAGE> 92
remain on hold through year end, waiting for signs of rekindled inflation.
Stable interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
3
<PAGE> 93
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 3.8%
DOMESTIC -- 3.2%
American Express Centurion Bank
Monthly Variable Rate (final
maturity 1/9/98)*.............. A1/P1 5.61% 09/09/97 $ 25,000,000 $ 24,999,318
American Express Centurion Bank
Monthly Variable Rate (final
maturity 4/15/98)*............. A1/P1 5.62% 09/15/97 50,000,000 50,000,000
American Express Centurion Bank
Monthly Variable Rate (final
maturity 6/26/98)*............. A1/P1 5.60% 09/26/97 25,000,000 25,000,000
Bank of New York................. A1/P1 6.10% 05/22/98 25,000,000 24,981,100
Huntington National Bank......... A1/P1 5.94% 08/31/98 50,000,000 49,971,415
PNC Bank, N.A., Monthly Variable
Rate (final maturity
10/01/97)*..................... A1/P1 5.52% 09/02/97 25,000,000 24,998,382
PNC Bank, N.A., Monthly Variable
Rate (final maturity
11/25/97)*..................... A1/P1 5.52% 09/25/97 50,000,000 49,963,450
--------------
TOTAL DOMESTIC BANK NOTES......... 249,913,665
--------------
FOREIGN -- 0.6%
Abbey National Treasury Services,
PLC............................ A1+/P1 6.00% 06/17/98 50,000,000 49,997,726
--------------
TOTAL BANK NOTES (AMORTIZED COST
$299,911,391).................... 299,911,391
--------------
CERTIFICATE OF DEPOSIT -- 18.9%
DOMESTIC -- 5.0%
Bankers Trust Company, Daily
Variable Rate (final maturity
07/21/98)*..................... A1/P1 5.65% 09/02/97 25,000,000 24,989,321
Bankers Trust Company, Daily
Variable Rate (final maturity
9/30/97)*...................... A1/P1 5.62% 09/02/97 50,000,000 49,997,695
Bankers Trust Company, Weekly
Variable Rate (final maturity
10/16/97)*..................... A1/P1 5.50% 09/03/97 25,000,000 24,997,139
Bankers Trust Company, Weekly
Variable Rate (final maturity
12/10/97)*..................... A1/P1 5.56% 09/03/97 25,000,000 24,996,575
Bankers Trust Company, Weekly
Variable Rate (final maturity
07/07/98)*..................... A1/P1 5.66% 09/03/97 50,000,000 49,971,403
Crestar Bank..................... A1/P1 5.49% 09/19/97 25,000,000 25,000,000
Crestar Bank..................... A1/P1 5.63% 11/20/97 50,000,000 50,001,644
Crestar Bank..................... A1/P1 5.80% 04/08/98 50,000,000 50,000,000
Crestar Bank..................... A1/P1 5.86% 07/20/98 50,000,000 49,991,561
Morgan Guaranty Trust Company.... A1/P1 5.80% 07/28/98 25,000,000 24,991,346
Morgan Guaranty Trust Company.... A1/P1 5.87% 08/06/98 25,000,000 24,993,337
--------------
TOTAL DOMESTIC.................... 399,930,021
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
4
<PAGE> 94
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
EURO -- 0.9%
Sumitomo Bank, Ltd., London...... A1/P1 5.76% 10/15/97 $ 50,000,000 $ 50,000,602
Sumitomo Bank, Ltd., London...... A1/P1 5.77% 10/17/97 25,000,000 25,000,315
--------------
TOTAL EURO........................ 75,000,917
--------------
YANKEE -- 13.0%
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.85% 01/07/98 25,000,000 24,996,564
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.88% 01/13/98 25,000,000 24,998,244
Banque National de Paris,
Chicago........................ A1/P1 5.97% 07/01/98 25,000,000 24,984,140
Banque National de Paris,
Chicago........................ A1/P1 5.89% 07/21/98 25,000,000 24,993,240
Banque National de Paris,
Chicago........................ A1/P1 5.80% 07/31/98 25,000,000 24,989,085
Banque National de Paris, New
York........................... A1/P1 5.75% 02/26/98 25,000,000 24,994,054
BHF Bank of Aktiengesellschaft,
New York, Monthly Variable Rate
(final maturity 8/13/98)*...... A1/P1 5.56% 09/15/97 50,000,000 49,981,553
Canadian Imperial Bank of
Commerce, New York............. A1/P1 5.87% 08/11/98 25,000,000 24,980,849
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.83% 09/02/97 25,000,000 25,000,007
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.94% 12/16/97 55,500,000 55,511,349
Industrial Bank of Japan, New
York........................... A1/P1 5.94% 12/04/97 50,000,000 50,001,267
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/10/97 50,000,000 50,001,356
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/11/97 50,000,000 50,001,369
Istituto Bancario San Paolo Di
Torino, New York............... A1/P1 5.87% 07/20/98 50,000,000 49,987,345
Landesbank Hessen-Thuringen
Girozentrale, New York......... A1/P1 5.94% 06/19/98 25,000,000 24,988,570
National Australia Bank, New
York........................... A1/P1 5.80% 10/03/97 25,000,000 24,999,843
National Bank of Canada, New
York........................... A1/P1 6.15% 05/15/98 44,000,000 43,984,023
National Bank of Canada, New
York........................... A1/P1 6.14% 06/05/98 25,000,000 24,996,188
Royal Bank of Canada, New York... A1/P1 5.58% 12/11/97 25,000,000 24,991,983
Royal Bank of Canada, New York... A1/P1 5.65% 03/03/98 80,000,000 79,942,894
Societe Generale Bank, New York.. A1/P1 5.77% 01/09/98 25,000,000 24,996,590
Societe Generale Bank, New York.. A1/P1 5.59% 11/14/97 30,000,000 30,001,283
Societe Generale Bank, New York.. A1/P1 5.73% 10/15/97 15,000,000 15,002,168
Societe Generale Bank, New York.. A1/P1 5.77% 01/07/98 25,000,000 24,997,481
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 1/15/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,994,305
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 6/16/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,988,571
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 8/25/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,985,793
</TABLE>
- ---------------
See Notes to Financial Statements.
5
<PAGE> 95
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
YANKEE -- (CONTINUED)
Societe Generale Bank, New York,
Quarterly Variable Rate (final
maturity 12/24/97)*............ A1/P1 5.68% 09/24/97 $ 25,000,000 $ 24,994,534
Sumitomo Bank Ltd., New York..... A1/P1 5.60% 09/08/97 25,000,000 24,999,846
Westdeutsche Landes Bank Girozen
Trole, New York................ A1/P1 5.78% 07/31/98 35,000,000 34,992,741
Westpac Banking Corp., New
York........................... A1/P1 5.83% 01/22/98 25,000,000 24,998,125
Westpac Banking Corp., New
York........................... A1/P1 5.93% 08/12/98 25,000,000 24,990,964
--------------
TOTAL YANKEE...................... 1,034,266,324
--------------
TOTAL CERTIFICATE OF DEPOSIT
(AMORTIZED COST
$1,509,197,262).................. 1,509,197,262
--------------
COMMERCIAL PAPER -- 31.5%
DOMESTIC -- 26.9%
ASSET BACKED SECURITIES -- 9.3%
Aesop Funding Corp............... A1/P1 5.52% 09/19/97 33,300,000 33,208,092
Aesop Funding Corp............... A1/P1 5.52% 09/22/97 30,000,000 29,903,400
Aesop Funding Corp............... A1/P1 5.55% 10/02/97 40,000,000 39,808,833
Banc One Funding Corp............ A1/P1 5.53% 10/17/97 37,687,000 37,420,699
Beta Finance Inc................. A1/P1 5.53% 09/24/97 50,000,000 49,823,347
CC USA Inc....................... A1/P1 5.54% 11/05/97 21,500,000 21,284,940
CC USA Inc....................... A1/P1 5.55% 02/02/98 50,000,000 48,812,917
Corporate Asset Funding
Company........................ A1/P1 5.52% 10/17/97 50,000,000 49,647,333
Corporate Asset Funding
Company........................ A1/P1 5.54% 10/27/97 50,000,000 49,569,111
Enterprise Funding Corp. (b)..... A1/P1 5.52% 10/14/97 19,400,000 19,272,089
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 25,364,000 25,109,832
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 44,317,000 43,872,907
Golden Managers Acceptance
Corp........................... A1/P1 5.55% 09/19/97 45,000,000 44,875,125
Gotham Funding Corp.(b).......... A1/P1 5.70% 12/29/97 25,000,000 24,528,958
Riverwood Funding Corp........... A1/P1 5.52% 09/23/97 42,500,000 42,356,633
Riverwood Funding Corp........... A1/P1 5.52% 09/26/97 50,000,000 49,808,333
Sigma Finance Inc................ A1/P1 5.55% 10/14/97 50,000,000 49,668,542
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/04/97 35,000,000 34,655,911
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/05/97 50,000,000 49,500,764
--------------
TOTAL ASSET BACKED SECURITIES..... 743,127,766
--------------
AUTOMOBILES -- 3.5%
American Honda Finance Corp...... F1/P1 5.54% 10/22/97 30,000,000 29,764,550
American Honda Finance Corp...... F1/P1 5.55% 11/07/97 40,000,000 39,586,833
Daimler-Benz North America
Corp........................... A1/P1 5.61% 09/08/97 25,000,000 24,972,729
Daimler-Benz North America
Corp........................... A1/P1 5.51% 11/06/97 50,000,000 49,494,917
Daimler-Benz North America
Corp........................... A1/P1 5.52% 12/03/97 33,908,000 33,424,472
General Motors Acceptance Corp... P1/D1 5.40% 09/12/97 50,000,000 49,917,500
General Motors Acceptance Corp... P1/D1 5.82% 11/05/97 50,000,000 49,474,583
--------------
TOTAL AUTOMOBILES................. 276,635,584
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
6
<PAGE> 96
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANKING -- 3.3%
Bankers Trust, New York, Daily
Variable Rate (final maturity
11/7/97)*...................... A1/P1 5.72% 09/02/97 $ 25,000,000 $ 25,000,000
Bankers Trust, New York, Daily
Variable Rate (final maturity
1/9/98)*....................... A1/P1 5.74% 09/02/97 50,000,000 50,000,000
Svenska Handelsbanken, Inc....... A1/P1 5.52% 12/22/97 49,890,000 49,033,222
Unifunding, Inc.................. A1/P1 5.52% 10/20/97 36,000,000 35,729,520
Unifunding, Inc.................. A1/P1 5.55% 11/18/97 50,000,000 49,398,750
Unifunding, Inc.................. A1/P1 5.56% 12/11/97 50,000,000 49,220,056
--------------
TOTAL BANKING..................... 258,381,548
--------------
BROKERAGE SERVICES -- 3.1%
Lehman Brothers Holdings, Inc.... A1/F1 5.57% 09/19/97 50,000,000 49,860,750
Lehman Brothers Holdings, Inc.... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
Lehman Brothers Holdings, Inc.,
Weekly Variable Rate (final
maturity 4/03/98)*............. A1/F1 5.78% 09/08/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc......... A1/P1 5.53% 12/12/97 25,000,000 24,608,292
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Smith Barney Holdings, Inc....... A1/P1 5.52% 10/06/97 50,000,000 49,731,667
--------------
TOTAL BROKERAGE SERVICES.......... 247,466,716
--------------
CHEMICALS-DIVERSIFIED -- 0.2%
AKZO Nobel Inc................... A1/P1 5.62% 10/10/97 20,000,000 19,878,233
--------------
CONGLOMERATES -- 0.3%
B.A.T. Capital Corp.............. A1/P1 5.62% 09/03/97 25,000,000 24,992,194
--------------
CONSUMER NON-DURABLES -- 1.6%
Newell Co........................ A1/D1 5.54% 09/29/97 40,000,000 39,827,644
Newell Co........................ A1/D1 5.55% 10/29/97 50,000,000 49,552,917
Newell Co........................ A1/D1 5.56% 11/05/97 40,000,000 39,598,444
--------------
TOTAL CONSUMER NON-DURABLES....... 128,979,005
--------------
FINANCE COMPANIES -- 1.7%
Countrywide Home Loans, Inc...... A1/F1 5.63% 09/02/97 34,000,000 33,994,683
Countrywide Home Loans, Inc...... A1/F1 5.60% 09/19/97 25,000,000 24,930,000
Countrywide Home Loans, Inc...... A1/F1 5.52% 10/22/97 50,000,000 49,609,000
Countrywide Home Loans, Inc...... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
--------------
TOTAL FINANCE COMPANIES........... 133,229,204
--------------
INSURANCE -- 0.3%
Marsh & Mclennan Companies,
Inc............................ A1/P1 5.75% 02/20/98 28,000,000 27,230,778
--------------
PUBLISHING -- 0.6%
Tribune Company.................. A1/F1 5.55% 10/22/97 20,000,000 19,842,750
Tribune Company.................. A1/F1 5.65% 12/22/97 25,000,000 24,560,556
--------------
TOTAL PUBLISHING.................. 44,403,306
--------------
RELOCATION SERVICES -- 0.7%
PHH Corporation.................. A1/P1 5.58% 09/19/97 25,000,000 24,930,250
PHH Corporation.................. A1/P1 5.52% 10/31/97 35,000,000 34,678,000
--------------
TOTAL RELOCATION SERVICES......... 59,608,250
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
7
<PAGE> 97
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
SOVEREIGN ISSUES -- 0.6%
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 11/05/97 $ 29,500,000 $ 29,205,451
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 12/03/97 15,700,000 15,475,712
--------------
TOTAL SOVEREIGN ISSUES............ 44,681,163
--------------
UTILITIES -- 1.7%
Duke Capital Corp................ 5.56% 10/06/97 88,955,000 88,473,770
Edison International............. A1/P1 5.60% 10/22/97 50,000,000 49,603,333
--------------
TOTAL UTILITIES................... 138,077,103
--------------
TOTAL DOMESTIC COMMERCIAL PAPER... 2,146,690,850
--------------
FOREIGN -- 4.6%
AIR TRANSPORTATION -- 1.0%
BAA PLC.......................... A1/P1 5.53% 12/03/97 76,410,000 75,318,419
--------------
BUILDING SOCIETY -- 0.9%
Bradford & Bingley Building
Society........................ A1/P1 5.62% 12/29/97 50,000,000 49,071,139
Bradford & Bingley Building
Society........................ A1/P1 5.56% 02/17/98 25,000,000 24,347,472
--------------
TOTAL BUILDING SOCIETY............ 73,418,611
--------------
OIL AND GAS -- 0.5%
Repsol International Finance..... A1/P1 4.98% 09/09/97 40,000,000 39,950,222
--------------
SOVEREIGN ISSUES -- 1.6%
Cades............................ A1/P1 5.39% 10/03/97 50,000,000 49,760,667
Cades............................ A1/P1 5.41% 10/10/97 25,000,000 24,853,479
Cades............................ A1/P1 5.44% 11/14/97 50,000,000 49,440,889
--------------
TOTAL SOVEREIGN ISSUES............ 124,055,035
--------------
TELECOMMUNICATIONS -- 0.6%
Alcatel Alsthom, Inc............. A1/P1 5.60% 12/16/97 50,000,000 49,175,556
--------------
TOTAL FOREIGN COMMERCIAL PAPER.... 361,917,843
--------------
TOTAL COMMERCIAL PAPER (AMORTIZED
COST $2,508,608,693)............. 2,508,608,693
--------------
CORPORATE BOND -- 15.3%
ASSET BACKED SECURITIES -- 2.5%
CC USA, Inc...................... A1/P1 6.18% 05/26/98 20,000,000 20,002,393
Ciesco, L.P., Monthly Variable
Rate (final maturity
2/10/98)*...................... A1/P1 5.57% 09/12/97 75,000,000 74,996,671
Sigma Finance, Inc................ A1/P1 5.92% 03/05/98 50,000,000 49,991,984
Sigma Finance, Inc., Daily
Variable Rate (final maturity
7/27/98)*........................ A1/P1 5.68% 09/02/97 50,000,000 49,999,104
--------------
TOTAL ASSET BACKED SECURITIES..... 194,990,152
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
8
<PAGE> 98
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
AUTOMOBILES -- 2.3%
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/6/98)*.............. F1/P1 5.79% 10/06/97 $ 50,000,000 $ 49,994,265
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/9/98)*.............. F1/P1 5.75% 10/09/97 24,000,000 24,001,339
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 7/27/98)*............. F1/P1 5.72% 10/27/97 45,000,000 45,000,000
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 6/16/98)*............. F1/P1 5.81% 06/16/98 20,000,000 20,000,000
Ford Motor Credit Corp........... A1/P1 7.13% 12/01/97 25,000,000 25,089,658
General Motors Acceptance Corp.,
Quarterly Variable Rate (final
maturity 1/20/98)*............. F1/D1 5.82% 10/20/97 20,000,000 20,004,971
--------------
TOTAL AUTOMOBILES................. 184,090,233
--------------
BANKING -- 0.6%
Compagnie Bancaire USA Funding,
Daily Variable Rate (final
maturity 5/15/98)*............. A1/P1 5.79% 09/02/97 50,000,000 49,996,031
--------------
BROKERAGE SERVICES -- 4.5%
Bear Stearns Companies, Inc.,
Series B, Daily Variable Rate
(final maturity 3/17/98)*...... A1/P1 5.70% 09/02/97 75,000,000 75,000,000
Bear Stearns Companies, Inc.,
Series B, Monthly Variable Rate
(final maturity 4/1/98)*....... A1/P1 5.78% 09/02/97 18,000,000 18,015,439
C. S. First Boston, Inc., Daily
Variable Rate (final maturity
7/21/98)*...................... A1/P1 5.67% 09/02/97 50,000,000 50,000,000
C. S. First Boston, Inc., Weekly
Variable Rate (final maturity
5/15/98)*...................... A1/P1 5.61% 09/03/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
11/20/97)*..................... A1/P1 5.56% 09/03/97 50,000,000 49,997,874
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
1/29/98)*...................... A1/P1 5.59% 09/03/97 50,000,000 49,995,999
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
3/4/98)*....................... A1/P1 5.61% 09/03/97 19,000,000 18,985,204
Merrill Lynch & Co., Inc.,
Quarterly Variable Rate (final
maturity 11/13/97)*............ A1/P1 5.68% 11/13/97 50,000,000 49,997,008
--------------
TOTAL BROKERAGE SERVICES.......... 361,991,524
--------------
CONGLOMERATES -- 0.3%
Philip Morris Co., Inc............ A1/P1 9.00% 05/15/98 22,625,000 23,054,018
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
9
<PAGE> 99
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
FINANCE COMPANIES -- 2.1%
Associates Corp., North America.. A1/P1 6.63% 11/15/97 $ 20,000,000 $ 20,037,809
CIT Group Holdings, Inc.......... A1/P1 7.00% 09/30/97 29,700,000 29,728,947
Dean Witter Discover & Co........ A1/P1 6.00% 03/01/98 15,000,000 15,009,675
Household Finance Corp., Daily
Variable Rate (final maturity
5/28/98)*...................... A1/P1 5.72% 09/02/97 50,000,000 50,000,000
Household Finance Corp., Monthly
Variable Rate (final maturity
9/15/98)*...................... A1/P1 5.70% 09/15/97 50,000,000 50,043,350
--------------
TOTAL FINANCE COMPANIES........... 164,819,781
--------------
LEASING -- 1.8%
Sanwa Business Credit Corp.,
Daily Variable Rate (final
maturity 4/17/98)*............. P1/D1 5.84% 09/02/97 25,000,000 25,000,000
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 12/08/97)*............ P1/D1 5.80% 09/08/97 30,000,000 30,011,824
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 4/29/98)*............. P1/D1 5.76% 09/29/97 25,000,000 25,013,500
Sanwa Business Credit Corp.,
Quarterly Variable Rate (final
maturity 2/6/98)*.............. P1/D1 5.72% 11/06/97 25,000,000 24,998,918
USL Capital Corp., Series D,
Quarterly Variable Rate (final
maturity 4/22/98)*............... P1/F1 5.83% 10/22/97 34,000,000 34,022,741
--------------
TOTAL LEASING..................... 139,046,983
--------------
RELOCATION SERVICES -- 0.6%
PHH Corporation, Monthly Variable
Rate (final maturity
6/24/98)*...................... A1/P1 5.63% 09/24/97 50,000,000 50,000,000
--------------
RETAILING -- 0.6%
Sears Roebuck Acceptance Corp.... P1/F1 5.74% 10/02/97 50,000,000 49,999,569
--------------
TOTAL CORPORATE BOND (AMORTIZED
COST $1,217,988,291)............. 1,217,988,291
--------------
MASTER NOTE -- 7.5%
Goldman Sachs Group L.P. (final
maturity 1/16/98)*............. A1/P1 5.83% 09/02/97 300,000,000 300,000,000
Morgan Stanley Group, Inc. (final
maturity 3/24/98)*............. A1/P1 5.79% 09/02/97 300,000,000 300,000,000
--------------
TOTAL MASTER NOTE (AMORTIZED COST
$600,000,000).................... 600,000,000
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 100
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(C) -- 23.6%
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $50,833,610
(Collateralized by $50,930,000
various U.S. Government
Obligations, 6.15%-7.55%,
1/27/00 -- 6/10/04, market
value -- $51,819,652)............ 5.60% 09/02/97 $ 50,802,000 $ 50,802,000
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $80,049,956
(Collateralized by $80,725,000
U.S. Government Obligations,
6.40%-6.50%, 5/2/01 -- 2/25/02,
market value -- $81,602,028)..... 5.62% 09/02/97 80,000,000 80,000,000
First Chicago Capital Markets,
Inc., dated 8/29/97, with a
maturity value of $150,093,833
(Collateralized by $157,483,000
various U.S. Government
Obligations, 0.00% -- 7.89%,
9/11/97 -- 8/15/03, market
value -- $153,001,916)........... 5.63% 09/02/97 150,000,000 150,000,000
First National Bank of Chicago,
dated 8/29/97, with a maturity
value of $50,031,278
(Collateralized by $51,390,000
Federal National Mortgage
Association Note, 7.02%, 8/28/07,
market value -- $51,004,575)..... 5.63% 09/02/97 50,000,000 50,000,000
Fuju Securities, Inc., dated
8/29/97, with a maturity value of
$300,187,000 (Collateralized by
$318,677,000 various U.S.
Government Obligations, 0.00% --
10.35%, 9/4/97 -- 8/15/26, market
value -- $306,000,902)........... 5.61% 09/02/97 300,000,000 300,000,000
HSBC Securities, Inc., dated
8/29/97, with a maturity value of
$350,218,556 (Collateralized by
$351,407,000 various U.S.
Government Obligations, 0.00%-
9.25%, 9/2/97 -- 6/15/07, market
value -- $357,001,503)........... 5.62% 09/02/97 350,000,000 350,000,000
Lehman Brothers, Inc., dated
8/29/97, with a maturity value of
$41,031,969 (Collateralized by
$69,764,000 U.S. Treasury Notes,
0.00%, 8/15/03 -- 11/15/08,
market value -- $41,828,863)..... 5.48% 09/02/97 41,007,000 41,007,000
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 101
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(C) -- (CONTINUED)
Merrill Lynch Securities, dated
8/29/97, with a maturity value of
$100,062,444 (Collateralized by
$115,399,948 Federal National
Mortgage Association Notes,
5.50% -- 9.00%, 3/1/03 -- 9/1/26,
market value -- $102,002,243).... 5.62% 09/02/97 $100,000,000 $ 100,000,000
NationsBanc, Inc., dated 8/29/97,
with a maturity value of
$230,143,750 (Collateralized by
$233,746,164 various U.S.
Government Obligations, 0.00% --
9.50%, 9/2/97 -- 8/1/27, market
value -- $234,600,486)........... 5.63% 09/02/97 230,000,000 230,000,000
Nomura Securities, Inc., dated
8/29/97, with a maturity value of
$200,124,667 (Collateralized by
$265,004,426 Government National
Mortgage Association Notes,
6.00% -- 10.00%,
1/1/00 -- 8/20/27, market
value -- $204,000,000)........... 5.61% 09/02/97 200,000,000 200,000,000
Prudential Securities, Inc., dated
8/29/97, with a maturity value of
$250,155,556 (Collateralized by
$324,844,908 various U.S.
Government Obligations, 0.00%-
10.00%, 1/15/98 -- 8/1/27, market
value -- $255,000,250)........... 5.60% 09/02/97 250,000,000 250,000,000
Smith Barney, Inc., dated 8/29/97,
with a maturity value of
$80,049,778 (Collateralized by
$117,897,650 various U.S.
Government Obligations,0.00% --
8.00%, 7/15/08 -- 2/1/27, market
value -- $81,600,397)............ 5.60% 09/02/97 80,000,000 80,000,000
--------------
TOTAL REPURCHASE AGREEMENT
(AMORTIZED COST
$1,881,809,000).................. 1,881,809,000
--------------
TOTAL INVESTMENTS -- 100.6%
(AMORTIZED COST
$8,017,514,637)(A)............... 8,017,514,637
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.6%)................. (45,980,584)
--------------
NET ASSETS -- 100.0%.............. $7,971,534,053
==============
</TABLE>
- ---------
Percentages indicated are based on net assets of $7,971,534,053.
(a) Cost for federal income tax and financial reporting purposes are
substantially the same.
(b) Private placement security.
(c) The range of coupon rates and maturity dates are shown.
PLC -- Public Liability Company.
N.R.S.R.O. Nationally Recognized Statistical Ratings Organization. Rating
agencies that are included within the N.R.S.R.O. category are: S&P,
Moody's, Fitch Investors Services, Duff & Phelps, IBCA, and Thomsons
Bank Watch.
A1 -- Highest rating assigned by S&P and IBCA.
P1 -- Highest rating assigned by Moody's.
F1 -- Highest rating assigned by Fitch Investors.
D1 -- Highest rating assigned by Duff.
TBW1 -- Highest rating assigned by Thomsons Bank Watch.
Note: S&P and Moody's ratings have been used, unless another service has
assigned the security a higher rating.
* Variable rate security. Maturity date reflects the next interest rate change
date.
See Notes to Financial Statements.
12
<PAGE> 102
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- ----------------------------------------------- ---- -------- ------------ --------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 40.9%
U.S. Treasury Note............................ 5.75% 09/30/97 $225,000,000 $ 225,035,616
U.S. Treasury Note............................ 8.75% 10/15/97 85,000,000 85,306,286
U.S. Treasury Note............................ 5.63% 10/31/97 75,000,000 74,996,423
U.S. Treasury Note............................ 7.38% 11/15/97 125,000,000 125,433,922
U.S. Treasury Note............................ 5.00% 01/31/98 50,000,000 49,868,354
U.S. Treasury Note............................ 5.63% 01/31/98 25,000,000 24,994,602
U.S. Treasury Note............................ 7.25% 02/15/98 125,000,000 125,862,200
U.S. Treasury Note............................ 5.13% 02/28/98 125,000,000 124,721,871
U.S. Treasury Note............................ 6.13% 03/31/98 100,000,000 100,290,389
U.S. Treasury Note............................ 7.88% 04/15/98 75,000,000 76,020,454
U.S. Treasury Note............................ 6.13% 05/15/98 25,000,000 25,076,923
--------------
TOTAL U.S. TREASURY OBLIGATIONS (AMORTIZED COST
$1,037,607,040)............................... 1,037,607,040
--------------
REPURCHASE AGREEMENTS(B) -- 46.5%
Barclays de Zoete Wedd Securities, Inc., dated
8/29/97, with a maturity value of $32,477,835
(Collateralized by $34,185,000 various U.S.
Treasury Securities, 0.00%-6.38%, 8/20/98-
8/15/27, market value -- $33,107,529)......... 5.50% 09/02/97 32,458,000 32,458,000
Barclays de Zoete Wedd Securities, Inc., dated
8/29/97, with a maturity value of $150,092,667
(Collateralized by $148,374,000 various U.S.
Treasury Securities, 0.00%-8.13%, 5/15/00-
8/15/27, market value -- $153,000,376)........ 5.56% 09/02/97 150,000,000 150,000,000
CIBC Wood Gundy Securities, Inc., dated
8/29/97, with a maturity value of $100,061,667
(Collateralized by $100,300,000 various U.S.
Treasury Securities, 4.75%-6.88%, 10/31/98-
8/15/25, market value -- $102,001,360)........ 5.55% 09/02/97 100,000,000 100,000,000
C. S. First Boston Corp., dated 8/29/97, with a
maturity value of $100,061,444 (Collateralized
by $102,600,000 U. S. Treasury Note, 5.88%,
2/15/00, market value -- $102,509,208)........ 5.53% 09/02/97 100,000,000 100,000,000
Dean Witter Reynolds, Inc., dated 8/29/97, with
a maturity value of $100,061,667
(Collateralized by $108,650,000 various U.S.
Treasury Securities, 0.00%-7.50%,
9/30/97-8/15/12, market
value -- $102,000,208)........................ 5.55% 09/02/97 100,000,000 100,000,000
Goldman Sachs, & Co., dated 8/29/97, with a
maturity value of $150,092,500 (Collateralized
by $149,453,000 U.S. Treasury Notes, 5.88%-
6.88%, 3/31/99-7/31/99, market value --
$153,000,041)................................. 5.55% 09/02/97 150,000,000 150,000,000
HSBC Securities, Inc., dated 8/29/97, with a
maturity value of (Collateralized by
$244,109,000 various U.S. Treasury Notes,
0.00%, 11/15/97-5/15/12, market value --
$153,000,207)................................. 5.57% 09/02/97 150,000,000 150,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 103
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- ----------------------------------------------- ----- -------- ---------- --------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(B) -- (CONTINUED)
J.P. Morgan Securities, Inc., dated 8/29/97,
with a maturity value of $100,061,778
(Collateralized by $88,596,000 various U.S.
Treasury Securities, 0.00%-12.50%,
12/11/97-8/15/14, market
value -- $102,000,419)........................ 5.56% 09/02/97 $100,000,000 $ 100,000,000
Nomura Securities International, Inc., dated
8/29/97, with a maturity value of $150,092,667
(Collateralized by $151,360,000 U.S. Treasury
Securities, 5.13%-6.88%, 1/15/00-8/15/25,
market value -- $153,000,504)................. 5.56% 09/02/97 150,000,000 150,000,000
Smith Barney, Inc., dated 8/29/97, with a
maturity value of $150,092,667 (Collateralized
by $157,223,000 various U.S. Treasury
Securities, 0.00%-13.88%, 5/31/98-2/15/27,
market value $153,000,711).................... 5.56% 09/02/97 150,000,000 150,000,000
--------------
TOTAL REPURCHASE AGREEMENTS
(COST $1,182,458,000)......................... 1,182,458,000
--------------
TOTAL INVESTMENTS -- 87.4%
(AMORTIZED COST $2,220,065,040)(A)............ 2,220,065,040
OTHER ASSETS IN EXCESS OF LIABILITIES --
12.6%......................................... 319,151,789
--------------
NET ASSETS -- 100.0%........................... $2,539,216,829
==============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $2,539,216,829.
(a) Cost for federal income tax and financial reporting purpose are
substantially the same.
(b) The range of coupon rates and maturity dates for collateral are shown.
See Notes to Financial Statements.
14
<PAGE> 104
PACIFIC HORIZON GOVERNMENT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------------------- ---- -------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 52.3%
U.S. GOVERNMENT AGENCY OBLIGATIONS
(DISCOUNT) -- 13.7%
Federal Home Loan Bank........................... 5.49%+ 09/04/97 $2,573,000 $ 2,571,823
Federal Home Loan Bank........................... 5.62%+ 11/13/97 5,000,000 4,943,019
Federal Home Loan Mortgage Corporation........... 5.49%+ 09/02/97 4,873,000 4,872,257
Federal Home Loan Mortgage Corporation........... 5.49%+ 09/03/97 8,000,000 7,997,562
Federal Home Loan Mortgage Corporation........... 5.48%+ 09/04/97 12,401,000 12,395,335
Federal Home Loan Mortgage Corporation........... 5.49%+ 09/05/97 10,000,000 9,993,900
Federal Home Loan Mortgage Corporation........... 5.59%+ 11/14/97 8,846,000 8,744,355
Federal National Mortgage Association............ 5.49%+ 09/25/97 6,525,000 6,501,119
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(DISCOUNT)....................................... 58,019,370
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
(FIXED) -- 24.1%
Federal Farm Credit Bank......................... 5.54% 03/02/98 5,000,000 5,000,000
Federal Home Loan Bank........................... 6.00% 09/30/97 3,825,000 3,825,370
Federal Home Loan Bank........................... 5.72% 07/21/98 10,000,000 9,997,053
Federal Home Loan Mortgage Corporation........... 5.52% 11/06/97 3,000,000 2,999,754
Federal National Mortgage Association............ 7.09% 10/14/97 5,305,000 5,313,218
Federal National Mortgage Association............ 5.53% 10/29/97 10,000,000 9,996,465
Federal National Mortgage Association............ 5.45% 11/06/97 15,000,000 14,996,069
Federal National Mortgage Association............ 6.05% 11/10/97 2,000,000 2,001,316
Federal National Mortgage Association............ 6.02% 04/15/98 5,000,000 5,010,824
Federal National Mortgage Association............ 5.71% 06/23/98 10,000,000 9,996,259
Federal National Mortgage Association............ 7.00% 07/13/98 5,000,000 5,048,149
Federal National Mortgage Association............ 5.63% 08/14/98 5,000,000 4,991,349
Federal National Mortgage Association............ 5.71% 09/09/98 5,000,000 4,992,800
Student Loan Marketing Association............... 5.80% 10/01/97 3,000,000 3,000,000
Student Loan Marketing Association............... 5.60% 10/24/97 5,000,000 4,999,223
Student Loan Marketing Association............... 5.44% 12/19/97 10,000,000 9,995,334
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(FIXED).......................................... 102,163,183
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
(VARIABLE) -- 14.5%
Federal Home Loan Bank, Daily Variable Rate (final
maturity 11/18/97)*.............................. 6.00% 09/02/97 5,000,000 5,003,971
Federal National Mortgage Association, Daily
Variable Rate (final maturity 1/15/98)*.......... 5.66% 09/02/97 20,000,000 19,995,963
Federal National Mortgage Association, Monthly
Variable Rate (final maturity 12/3/97)*.......... 5.47% 09/03/97 20,000,000 19,996,527
Federal National Mortgage Association, Weekly
Variable Rate (final maturity 6/24/98)*.......... 5.50% 09/03/97 6,000,000 5,994,260
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 105
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------------------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (VARIA-
BLE) -- (CONTINUED)
Student Loan Marketing Association, Weekly
Variable Rate (final maturity 1/21/98)*.......... 5.61% 09/03/97 $8,750,000 $ 8,754,471
Student Loan Marketing Association, Weekly
Variable Rate (final maturity 2/17/98)*.......... 5.56% 09/03/97 2,000,000 2,000,799
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(VARIABLE)....................................... 61,745,991
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(AMORTIZED COST $221,928,544).................... 221,928,544
-----------
COMMERCIAL PAPER -- 9.0%
Downey Savings & Loan Association, LOC: Federal
Home Loan Bank of San Francisco.................. 5.52% 09/22/97 5,000,000 4,983,900
USA Group Secondary Market Services, Inc., LOC:
Student Loan Marketing Association............... 5.48% 09/19/97 15,000,000 14,958,900
Western Financial Savings Bank, LOC: Federal Home
Loan Bank of San Francisco....................... 5.57% 09/03/97 18,000,000 17,994,430
------------
TOTAL COMMERCIAL PAPER (AMORTIZED COST
37,937,230)...................................... 37,937,230
------------
REPURCHASE AGREEMENTS (B) -- 41.1%
CIBC Wood Gundy Securities, Inc., dated 8/29/97,
with a maturity value of $14,206,834
(Collateralized by $13,635,000 U.S. Government
Obligations, 7.55%-7.88%, 6/10/04 -- 2/24/05,
market value -- $14,482,620)..................... 5.60% 09/02/97 14,198,000 14,198,000
CIBC Wood Gundy Securities, Inc., dated 8/29/97,
with a maturity value of $20,012,489
(Collateralized by $20,395,000 U.S. Government
Obligations, 6.50%, 2/25/02 -- 7/29/02, market
value -- $20,400,036)............................ 5.62% 09/02/97 20,000,000 20,000,000
First National Bank of Chicago, dated 8/29/97,
with a maturity value of $20,012,511
(Collateralized by $20,560,000 U.S. Government
Obligations, 5.50%-7.02%, 12/31/00 -- 7/15/07,
market value -- $20,404,519)..................... 5.63% 09/02/97 20,000,000 20,000,000
Fuji Securities, Inc., dated 8/29/97, with a
maturity value of $20,012,467 (Collateralized by
$20,581,000 various U.S. Government Obligations,
0.00%-9.70%, 9/22/97 -- 4/15/24, market
value -- $20,400,084)............................ 5.61% 09/02/97 20,000,000 20,000,000
HSBC Securities, Inc., dated 8/29/97, with a
maturity value of $20,012,489 (Collateralized by
$20,932,834 various U.S. Government Obligations,
0.00%-9.00%, 12/8/97 -- 9/1/26, market value --
$20,404,547)..................................... 5.62% 09/02/97 20,000,000 20,000,000
Merrill Lynch Securities, Inc., dated 8/29/97,
with a maturity value of $20,012,489
(Collateralized by $102,746,401 U.S. Government
Obligations, 6.00%-10.00%, 11/1/00 -- 3/1/18,
market value -- $20,400,843)..................... 5.62% 09/02/97 20,000,000 20,000,000
Nationsbanc, Inc., dated 8/29/97, with a maturity
value of $20,012,500 (Collateralized by
$20,909,000 U.S. Government Obligations, 0.00%,
1/7/98 -- 2/26/98, market
value -- $20,400,366)............................ 5.63% 09/02/97 20,000,000 20,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 106
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------------------- ---- -------- ----------- ------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(B) -- (CONTINUED)
Prudential Securities, Inc., dated 8/29/97, with a
maturity value of $20,012,444 (Collateralized by
$20,025,000 U.S. Government Obligations, 0.00%-
6.25%, 2/26/98 -- 5/31/99, market value --
$20,400,600)..................................... 5.60% 09/02/97 $20,000,000 $ 20,000,000
Smith Barney, Inc., dated 8/29/97, with a maturity
value of $20,012,444 (Collateralized by
$27,934,185 Federal National Mortgage Association
Note, 6.50%, 4/1/09, market
value -- $20,400,000)............................ 5.60% 09/02/97 20,000,000 20,000,000
-----------
TOTAL REPURCHASE AGREEMENT
(AMORTIZED COST $174,198,000).................... 174,198,000
-----------
TOTAL INVESTMENTS -- 102.4%
(AMORTIZED COST 434,063,774)..................... 434,063,774
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.4%)... (10,103,268)
-----------
NET ASSETS -- 100.0%.............................. $423,960,506
===========
</TABLE>
- ---------------
<TABLE>
<S> <C>
Percentages indicated are based on net assets of $423,960,506.
(a) Cost for federal income tax and financial reporting purposes are substantially the same.
(b) The range of coupon rates and maturity dates of collateral are shown.
* Variable rate security. Maturity date reflects the next interest rate change date.
+ Rate represents effective yield at date of purchase.
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 107
PACIFIC HORIZON TREASURY ONLY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
MATURITY PRINCIPAL COST
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------------------- ---- -------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 94.1%
U.S. BILLS -- 19.3%
U.S. Treasury Bill............................... 5.45%+ 09/15/97 $30,000,000 $ 29,940,958
U.S. Treasury Bill............................... 5.37%+ 09/18/97 54,407,000 54,270,024
------------
TOTAL U.S. TREASURY BILLS
(AMORTIZED COST $84,210,982)..................... 84,210,982
------------
U.S. TREASURY NOTES -- 74.8%
U.S. Treasury Note............................... 5.75% 09/30/97 64,195,000 64,209,357
U.S. Treasury Note............................... 8.75% 10/15/97 58,275,000 58,500,508
U.S. Treasury Note............................... 5.63% 10/31/97 23,295,000 23,300,611
U.S. Treasury Note............................... 5.75% 10/31/97 30,000,000 30,014,476
U.S. Treasury Note............................... 7.38% 11/15/97 74,780,000 75,039,702
U.S. Treasury Note............................... 8.88% 11/15/97 40,525,000 40,785,843
U.S. Treasury Note............................... 5.25% 12/31/97 25,000,000 24,978,594
U.S. Treasury Note............................... 5.00% 01/31/98 9,780,000 9,754,356
------------
TOTAL U.S. TREASURY NOTES
(AMORTIZED COST $326,583,447).................... 326,583,447
------------
TOTAL INVESTMENTS -- 94.1%
(AMORTIZED COST $410,794,429)(A)................. 410,794,429
OTHER ASSETS IN EXCESS OF LIABILITIES -- 5.9%..... 25,695,573
------------
NET ASSETS -- 100.0%.............................. $436,490,002
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $436,490,002.
(a) Cost for federal income tax and financial reporting purposes are
substantially the same.
+ Rate represents effective yield at date of purchase.
See Notes to Financial Statements.
18
<PAGE> 108
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME TREASURY GOVERNMENT TREASURY
FUND FUND FUND ONLY FUND
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value (amortized cost
$6,135,705,637, $1,037,607,040, $259,865,774, and
$410,794,429, respectively)............................... $6,135,705,637 $1,037,607,040 $259,865,774 $410,794,429
Repurchase agreements (cost $1,881,809,000, $1,182,458,000,
$174,198,000, and $--, respectively)...................... 1,881,809,000 1,182,458,000 174,198,000 --
Cash....................................................... 26,337 10,149 2,485 1,413
Interest Receivable........................................ 41,624,568 31,501,744 1,896,922 9,942,189
Receivable for capital shares sold......................... 184,015,784 43,247,056 13,048,417 3,464,164
Receivable for investment securities sold.................. 2,083,305,000 1,557,423,000 182,641,000 82,715,968
Prepaid expenses........................................... 1,290,198 215,418 182,290 13,162
Deferred organizational costs.............................. -- -- 16,025 36,829
-------------- -------------- ------------ ------------
Total Assets............................................ 10,327,776,524 3,852,462,407 631,850,913 506,968,154
-------------- -------------- ------------ ------------
LIABILITIES:
Dividends payable.......................................... 35,043,189 11,144,019 1,896,329 1,786,440
Payable for investment securities purchased................ 1,981,823,530 1,182,458,000 184,190,800 60,045,255
Payable for capital shares redeemed........................ 335,925,601 118,404,646 21,519,702 7,689,009
Investment advisory fees payable........................... 602,283 218,793 18,727 37,049
Administration fees payable................................ 660,579 218,793 37,453 37,049
Special management fees payable (Pacific Horizon Shares)... 617,556 90,376 36,612 57,541
Shareholder service fees payable (Horizon Service
Shares)................................................... 661,706 330,512 55,036 42,552
Shareholder service fees payable (S Shares)................ 27,167 -- -- --
Shareholder service fees payable (X Shares)................ 98,980 5,557 -- --
Shareholder service fees payable (Y Shares)................ 3,830 1,399 -- --
12b-1 fees payable (X Shares).............................. 100,240 5,661 -- --
12b-1 fees payable (Y Shares).............................. 11,489 4,198 -- --
Custodian and fund accounting fees payable................. 146,903 76,330 33,925 29,426
Transfer agent fees payable................................ 27,764 17,859 23,904 13,810
Other accrued expenses..................................... 491,654 269,435 77,919 740,021
-------------- -------------- ------------ ------------
Total Liabilities....................................... 2,356,242,471 1,313,245,578 207,890,407 70,478,152
-------------- -------------- ------------ ------------
NET ASSETS................................................. $7,971,534,053 $2,539,216,829 $423,960,506 $436,490,002
============== ============== ============ ============
Net Assets:
Pacific Horizon Shares..................................... $2,257,973,852 $ 306,460,541 $131,977,630 $213,636,696
Horizon Shares............................................. 2,021,874,087 651,851,464 45,871,862 27,056,603
Horizon Service Shares..................................... 3,129,562,849 1,546,969,760 246,111,014 195,796,703
S Shares................................................... 118,539,347 -- -- --
Y Shares................................................... 36,737,587 8,575,078 -- --
X Shares................................................... 406,846,331 25,359,986 -- --
-------------- -------------- ------------ ------------
Total................................................... $7,971,534,053 $2,539,216,829 $423,960,506 $436,490,002
============== ============== ============ ============
Shares Outstanding ($0.001 par value, 120 billion, 60
billion, 30 billion, and 30 billion shares authorized,
respectively):
Pacific Horizon Shares................................... 2,258,185,450 306,616,098 132,172,504 213,660,132
Horizon Shares........................................... 2,022,168,081 651,970,162 45,913,190 27,056,497
Horizon Service Shares................................... 3,129,427,668 1,547,140,076 246,274,100 195,804,576
S Shares................................................. 118,538,233 -- -- --
Y Shares................................................. 36,737,583 8,575,078 -- --
X Shares................................................. 406,811,237 25,360,188 -- --
-------------- -------------- ------------ ------------
Total................................................... 7,971,868,252 2,539,661,602 424,359,794 436,521,205
============== ============== ============ ============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER
SHARE..................................................... $1.00 $1.00 $1.00 $1.00
=== === ==== ====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................. $ 7,971,868 2,539,662 $ 424,360 $ 436,521
Additional paid-in capital................................. 7,963,495,319 2,536,146,254 423,935,434 436,084,685
Accumulated undistributed net investment income............ 3,514,158 667,877 517,569 --
Accumulated net realized losses on investment
transactions.............................................. (3,447,292) (136,964) (916,857) (31,204)
-------------- -------------- ------------ ------------
NET ASSETS, AUGUST 31, 1997................................ $7,971,534,053 $2,539,216,829 $423,960,506 $436,490,002
============== ============== ============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 109
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT TREASURY ONLY
PRIME FUND TREASURY FUND FUND FUND
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest...................................... $209,184,808 $68,329,194 $12,870,176 $ 12,347,801
------------ ----------- ----------- -----------
EXPENSES:
Investment advisory fees...................... 3,360,652 1,243,655 232,092 231,331
Administration fees........................... 3,679,805 1,243,655 232,092 231,331
Special management fees (Pacific Horizon
Shares)..................................... 3,625,502 564,957 255,466 348,852
Shareholder service fees (Horizon Service
Shares)..................................... 3,857,672 1,863,062 317,180 273,696
Shareholder service fees (S Shares)........... 53,805 -- -- --
Shareholder service fees (X Shares)........... 375,826 15,855 -- --
Shareholder service fees (Y Shares)........... 3,907 1,414 -- --
12b-1 fees (S Shares)......................... 16,388 -- -- --
12b-1 fees (X Shares)......................... 450,991 18,832 -- --
12b-1 fees (Y Shares)......................... 11,722 4,243 -- --
Custodian and fund accounting fees............ 380,182 185,180 75,438 49,724
Transfer Agent fees........................... 162,342 70,985 33,596 48,944
Legal fees.................................... 295,692 112,670 21,970 19,470
Other expenses................................ 683,860 394,511 169,246 103,825
------------ ----------- ----------- -----------
Total Expenses.......................... 16,958,346 5,719,019 1,337,080 1,307,173
Less: Fee waivers............................. -- -- (116,046) --
Expenses paid by third parties................. -- -- (1,693) --
------------ ----------- ----------- -----------
Total Net Expenses............................. 16,958,346 5,719,019 1,219,341 1,307,173
------------ ----------- ----------- -----------
NET INVESTMENT INCOME.......................... 192,226,462 62,610,175 11,650,835 11,040,628
------------ ----------- ----------- -----------
NET REALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investment
transactions................................ 22,846 (78,987) 22,222 1,701
------------ ----------- ----------- -----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................... $192,249,308 $62,531,188 $11,673,057 $ 11,042,329
============ =========== =========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
20
<PAGE> 110
THIS PAGE INTENTIONALLY LEFT BLANK
21
<PAGE> 111
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME FUND
--------------------------------------
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
---------------- ----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................................. $ 192,226,462 $ 313,627,480
Net realized gains (losses) on investment transactions................ 22,846 172,885
---------------- ----------------
Change in net assets resulting from operations........................ 192,249,308 313,800,365
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Pacific Horizon Shares................................................ (57,653,267) (110,595,534)
Horizon Shares........................................................ (46,310,824) (79,709,197)
Horizon Service Shares................................................ (79,626,947) (119,808,778)
S Shares.............................................................. (629,524)(b) --
Y Shares.............................................................. (70,391)(c) --
X Shares.............................................................. (7,329,789) (2,322,836)(a)
---------------- ----------------
Change in net assets from shareholder distributions.................... (191,620,742) (312,436,345)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares Issued........................................... 24,957,660,701 42,442,585,809
Dividends reinvested.................................................. 89,864,407 177,262,119
Cost of shares redeemed............................................... (24,227,328,843) (40,881,572,699)
---------------- ----------------
Change in net assets from capital share transactions................... 820,196,265 1,738,275,229
---------------- ----------------
Change in net assets................................................... 820,824,831 1,739,639,249
NET ASSETS
Beginning of Period................................................... 7,150,709,222 5,411,069,973
---------------- ----------------
End of Period......................................................... $ 7,971,534,053 $ 7,150,709,222
================ ================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
See Notes to Financial Statements.
22
<PAGE> 112
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY FUND GOVERNMENT FUND TREASURY ONLY FUND
------------------------------------- ------------------------------------ ----------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED
1997 FEBRUARY 28, 1997 FEBRUARY 28, 1997 FEBRUARY 28,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
--------------- ---------------- --------------- --------------- ------------- ---------------
<S><C> <C> <C> <C> <C> <C>
$ 62,610,175 $ 139,590,623 $ 11,650,835 $ 26,370,373 $ 11,040,628 $ 22,616,016
(78,987) 86,112 22,222 12,552 1,701 31,462
--------------- ---------------- --------------- --------------- ------------- ---------------
62,531,188 139,676,735 11,673,057 26,382,925 11,042,329 22,647,478
--------------- ---------------- --------------- --------------- ------------- ---------------
(8,670,483) (38,697,555) (3,947,580) (10,822,314) (5,149,224) (12,248,712)
(16,481,973) (34,033,530) (1,336,707) (3,358,368) (647,928) (2,009,735)
(37,137,003) (66,796,890) (6,366,548) (12,135,558) (5,243,476) (8,357,569)
-- -- -- -- -- --
(296,397) (c) -- -- -- -- --
(24,319) (62,648)(a) -- -- -- --
--------------- ---------------- --------------- --------------- ------------- ---------------
(62,610,175) (139,590,623) (11,650,835) (26,316,240) (11,040,628) (22,616,016)
--------------- ---------------- --------------- --------------- ------------- ---------------
7,795,152,294 17,362,879,524 1,537,381,377 3,514,048,456 836,062,876 2,581,288,044
18,939,282 46,043,231 7,720,518 20,515,585 6,761,008 17,977,687
(7,866,290,247) (17,661,736,799) (1,637,750,888) (3,547,375,120) (921,538,489) (2,551,597,500)
--------------- ---------------- --------------- --------------- ------------- ---------------
(52,198,671) (252,814,044) (92,648,993) (12,811,079) (78,714,605) 47,668,231
--------------- ---------------- --------------- --------------- ------------- ---------------
(52,277,658) (252,727,932) (92,626,771) (12,744,394) (78,712,904) 47,699,693
2,591,494,487 2,844,222,419 516,587,277 529,331,671 515,202,906 467,503,213
--------------- ---------------- --------------- --------------- ------------- ---------------
$ 2,539,216,829 $ 2,591,494,487 $ 423,960,506 $ 516,587,277 $ 436,490,002 $ 515,202,906
=============== ================ =============== =============== ============= ===============
</TABLE>
23
<PAGE> 113
PACIF IC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. On August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Prime Fund (the
"Prime Fund"), Pacific Horizon Treasury Fund (the "Treasury Fund"), Pacific
Horizon Government Fund (the "Government Fund") and Pacific Horizon Treasury
Only Fund (the "Treasury Only Fund"), collectively the "Funds".
The Funds each issue three classes of shares (Pacific Horizon Shares,
Horizon Shares and Horizon Services Shares). Effective July 22, 1996, the Prime
Fund and the Treasury Fund began offering X Shares. The Prime Fund began
offering S Shares effective April 7, 1997 and effective July 10, 1997 the Prime
Fund and the Treasury Fund each began offering Y Shares. The Treasury Fund is
also authorized to issue S shares for purchase as of the date of this report.
Pacific Horizon Shares have a Special Management Services Agreement/Plan while
the Horizon Service Shares have a Shareholder Services Plan. X, S and Y Shares
each have a Distribution and Services Plan.
The investment objectives of the Funds are as follows:
Prime Fund -- Seek high current income and stability of principal by
investing in a broad range of government, bank and commercial obligations
available in the money markets as well as repurchase agreements relating to such
obligations.
Treasury Fund -- Seek high current income and stability of principal by
investing in direct obligations of the U.S. Treasury and repurchase agreements
relating to Treasury obligations.
Government Fund -- Provide liquidity and as high a level of current income
as is consistent with the preservation of capital by investing in short-term
debt obligations issued or guaranteed as to interest and principal by the U.S.
Government, its agencies, authorities or instrumentalities and in repurchase
agreements with respect to such obligations.
Treasury Only Fund -- Provide liquidity and as high a level of current
income as is consistent with the preservation of capital by investing in direct
obligations of the U.S. Treasury, such as Treasury bills, notes and bonds.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Con-
24
<PAGE> 114
cord Financial Group, Inc. (the "Distributor"), an indirect, wholly-owned
subsidiary of BISYS, served as the distributor of the Fund's shares through
September 15, 1997. BISYS Fund Services, Inc. ("BISYS Ohio"), also a
wholly-owned subsidiary of BISYS, served as transfer agent and dividend
disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The securities of the Funds 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 Funds may not (a) purchase any instrument with a
25
<PAGE> 115
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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses from security transactions are recorded on an
identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
REPURCHASE AGREEMENTS (PRIME FUND, TREASURY FUND, AND GOVERNMENT FUND):
The Funds' 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, exceeds the repurchase price. In the
event of the seller's default of the obligation to repurchase, the Funds have
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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income is declared as a dividend daily, and paid
monthly, to shareholders of record at the close of business on record date. Net
realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains of the Funds can be
offset by capital loss carryovers of the Funds, such gains will not be
distributed. Dividends and distributions are recorded by the Funds on the
ex-dividend date.
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.
Dividends and distribu-
26
<PAGE> 116
tions to shareholders which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized gains. To the extent they exceed net investment income
and net realized gains for tax purposes, they are reported as distributions of
capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
------------- --------------
<S> <C> <C>
Prime Fund $ 2,742 $182,342
Government
Fund 413 (413)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the Prime Fund, Treasury Fund, Government Fund, and
Treasury Only Fund had the following capital loss carryovers:
<TABLE>
<CAPTION>
CAPITAL
LOSS EXPIRATION
FUND CARRYOVER DATE
- ---------------------- ---------- ----------
<S> <C> <C>
Prime Fund $ 744,962 2002
2,725,176 2003
----------
$3,470,138
==========
Treasury Fund $ 47,456 2002
==========
Government Fund $ 939,079 2003
==========
Treasury Only Fund $ 23,969 2003
==========
</TABLE>
To the extent that these carryovers are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders.
Capital losses incurred after October 31 for the Funds are deemed to arise
on the first business day of the following fiscal year for tax purposes. The
Treasury Only Fund has incurred and elected to defer such capital losses of
$8,458 after October 31, 1996. During the year, the Prime Fund, Treasury Fund,
Government Fund, and Treasury Only Fund utilized $172,885, $10,901, $12,552, and
$40,236, respectively, of its available capital loss carryover to offset
realized capital gains for Federal income tax purposes.
OTHER:
The Funds maintain a cash balance with their 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, 1997, custodian fees and expenses paid by third parties
were increased by $1,693 for the Government Fund. There was no effect on net
investment income. The Funds could have
27
<PAGE> 117
invested such cash balances in income producing assets if they had not agreed to
a reduction of fees or expenses under the expense offset arrangement with their
custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America. For
the six months ended August 31, 1997, the Funds had an Administration Agreement
with BISYS. Bank of America is entitled to a fee from each Fund, which is
accrued daily and payable monthly, at an annual rate of 0.10% of each Fund's
first $3 billion of net assets, plus 0.09% of each Fund's next $2 billion of net
assets, plus 0.08% of each Fund's net assets in excess of $5 billion. BISYS was
entitled to a fee for each fund which is accrued daily and payable monthly, at
an annual rate of 0.10% of each Fund's first $7 billion of net assets, plus
0.09% of each Fund's next $3 billion of net assets, plus 0.08% of each Fund's
net assets in excess of $10 billion. For the six months ended August 31, 1997,
Bank of America voluntarily waived fees from the Government Fund in the amount
of $116,046.
The Funds have entered into a Special Management Services Agreement (the
"Services Agreement") pursuant to which they agree to pay Bank of America and
BISYS 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 assets of the outstanding Pacific Horizon Shares of each Fund.
Fees under the Services Agreement are borne solely by the Pacific Horizon
Shares.
Effective January 1997, the Services Agreement was terminated. The Funds
have adopted a Special Management Services Plan (the "Services Plan") pursuant
to which Service Organizations agree to provide certain services to their
clients who are beneficial owners of Pacific Horizon Shares in return for a
payment by the Funds of a fee at an annual rate 0.32% of the average daily net
assets of the outstanding Pacific Horizon Shares of each Fund. Fees under the
Services Plan are borne solely by the Pacific Horizon Shares. Service
organizations include BISYS, Bank of America and its affiliates. For the six
months ended August 31, 1997, the Funds were advised that BISYS, Bank of America
and their affiliates earned the following amounts pursuant to the Services
Agreement and Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES BISYS
- --------------------------- ---------- -------
<S> <C> <C>
Prime Fund $3,346,248 $22,110
Treasury Fund 416,132 5,446
Government Fund 240,521 159
Treasury Only Fund 317,930 25
</TABLE>
The Funds have also adopted a Shareholder Services Plan (the "Horizon
Services 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 Funds of a fee at an annual rate of 0.25% of the
average daily net assets of the Horizon Service Shares, which are borne solely
by the Horizon Service Shares. Service Organizations may include the
Distributor, Bank of
28
<PAGE> 118
America and their affiliates. For the six months ended August 31, 1997, the
Funds were advised that BISYS, Bank of America and its affiliates earned the
following amounts pursuant to the Horizon Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
- ----------------------------------- ----------
<S> <C>
Prime Fund $3,166,103
Treasury Fund 1,529,124
Government Fund 260,334
Treasury Only Fund 224,526
</TABLE>
The Prime Fund and Treasury Fund have adopted the Distribution and Services
Plan under which the Funds pay 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 each Fund's X Shares. For the six months ended August 31, 1997 the
Funds were advised that Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
- ----------------------------------- ----------
<S> <C>
Prime Fund $374,472
Treasury Fund 15,796
</TABLE>
The Prime Fund and Treasury Fund have adopted the Distribution and Services
Plan under which the Funds pay the Distributor and Service Organization for the
provision of support service with respect to the beneficial owners of Y shares.
Payments for distribution expenses and shareholder servicing expenses may not
exceed the annual rate of 0.75% and 0.25%; respectively, of the average daily
net assets of each Funds' Y shares. For the period from July 10, 1997(date of
inception) to August 31, 1997, the Funds were advised that Bank of America and
its affiliates earned the following amounts pursuant to the Distribution and
Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
- ----------------------------------- ----------
<S> <C>
Prime Fund $3,907
Treasury Fund 1,414
</TABLE>
The Prime Fund has adopted the Distribution and Services Plan under which
the Fund pays the Distributor and Service Organization for the provision of
support services with respect to the beneficial owners of S shares. Payments for
the distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%, respectively, of the average daily net assets of
the Funds' S shares. For the period from April 7, 1997(date of inception) to
August 31, 1997 the Fund was advised that Bank of America and its affiliates
earned $31,874 pursuant to the Distribution and Services Plan.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $162,342, $70,985, $33,596 and $48,944
from the Prime Fund, Treasury Fund, Government Fund and Treasury Only Fund,
respectively, for the six months ended August 31, 1997.
For the six months ended August 31, 1997, the Prime Fund, Treasury Fund,
29
<PAGE> 119
Government Fund and Treasury Only Fund incurred legal charges totaling $295,692,
$112,670, $21,970, and $19,470, respectively, which were earned by a law firm, a
partner of which serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the Director participates in all or part of a Board or
Committee meeting and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a Director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. A Director who dies or
resigns after nine years of service as a Director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. In addition, the amount
payable each year to a Director who dies or resigns shall be increased by $1,000
for each year of service that the Director served as Chairman of the Board. Each
Director may receive any benefits payable under the Retirement Plan, at his or
her election, either in one lump sum payment or ten annual installments. A
Director's years of service for the purpose of calculating the payments
described above shall be based upon service as a Director or Chairman after
February 28, 1994. Aggregate costs pursuant to the Retirement Plan amounted to
$15,064, $11,030, $4,600, and $1,819, for the Prime Fund, Treasury Fund,
Government Fund and Treasury Only Fund, respectively, for the six months ended
August 31, 1997.
30
<PAGE> 120
NOTE 5 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of each Fund (at $1.00 per share) for the periods
indicated are summarized below:
<TABLE>
<CAPTION>
TREASURY FUND
PRIME FUND ----------------------------------
---------------------------------------- SIX MONTHS
SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997 AUGUST 31, 1997 FEBRUARY 28, 1997
---------------- ----------------- --------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Pacific Horizon
Shares
Issued.......... 1,421,450,092 4,320,031,345 580,948,866 2,180,160,265
Reinvest........ 44,139,878 99,202,915 5,469,113 13,626,783
Redeemed........ (1,500,161,348) (4,326,928,364) (690,637,528) (2,875,003,912)
---------------- --------------- -------------- ---------------
Net increase/
(decrease)...... (34,571,378) 92,305,896 (104,219,549) (681,216,864)
================ =============== ============== ===============
Horizon Shares
Issued.......... 9,219,317,384 15,114,015,999 2,396,397,412 6,363,082,166
Reinvest........ 13,412,109 25,723,399 4,036,829 11,616,438
Redeemed........ (8,920,510,978) (15,081,065,299) (2,366,293,414) (6,478,650,334)
---------------- --------------- -------------- ---------------
Net increase/
(decrease)...... 312,218,515 58,674,099 34,140,827 (103,951,730)
================ =============== ============== ===============
Horizon Service
Shares
Issued.......... 13,634,158,320 22,771,276,975 4,767,137,830 8,799,447,002
Reinvest...... 26,468,915 50,011,411 9,248,752 20,737,353
Redeemed...... (13,476,384,289) (21,437,775,542) (4,786,570,782) (8,293,700,822)
---------------- --------------- -------------- ---------------
Net increase/
(decrease)...... 184,242,946 1,383,512,844 (10,184,200) 526,483,533
================ =============== ============== ===============
X Shares
Issued.......... 518,517,302 237,259,971 40,077,584 20,188,155
Reinvest........ 5,573,041 2,324,394 184,588 62,656
Redeemed........ (321,059,977) (35,803,494) (20,772,999) (14,379,796)
---------------- --------------- -------------- ---------------
Net increase..... 203,030,366 203,780,871(a) 19,489,173 5,871,015(a)
================ =============== ============== ===============
S Shares
Issued.......... 122,180,115 -- -- --
Reinvest........ 270,464 -- -- --
Redeemed........ (3,912,346) -- -- --
- -----------------
---------------- --------------- -------------- ---------------
Net increase..... 118,538,233 (b) -- -- --
================= ================ =============== ============== ===============
Y Shares
Issued.......... 42,037,008 -- 10,590,602 --
Reinvest........ -- -- -- --
Redeemed........ (5,299,425) -- (2,015,524) --
- -----------------
---------------- --------------- -------------- ---------------
Net increase..... 36,737,583 (c) -- 8,575,078 (c) --
================= ================ =============== ============== ===============
</TABLE>
31
<PAGE> 121
<TABLE>
<CAPTION>
TREASURY ONLY FUND
GOVERNMENT FUND -----------------------------------
----------------------------------- SIX MONTHS
SIX MONTH ENDED YEAR ENDED ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997 AUGUST 31, 1997 FEBRUARY 28, 1997
--------------- ----------------- --------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Pacific Horizon
Shares
Issued.......... 257,713,167 817,557,991 226,866,017 1,028,727,745
Reinvest........ 3,157,080 8,010,482 3,890,458 10,180,140
Redeemed........ (321,130,038) (894,476,160) (242,297,570) (1,088,026,565)
-------------- -------------- ------------ ------------
Net decrease..... (60,259,791) (68,907,687) (11,541,095) (49,118,680)
============== ============== ============ ============
Horizon Shares
Issued.......... 79,305,963 205,437,403 22,424,393 195,585,962
Reinvest........ 829,562 2,653,506 176,047 1,168,058
Redeemed........ (95,392,117) (201,774,473) (26,002,534) (173,560,437)
-------------- -------------- ------------ ------------
Net increase/
(decrease)...... (15,256,592) 6,316,436 (3,402,094) 23,193,583
============== ============== ============ ============
Horizon Service
Shares
Issued.......... 1,200,362,247 2,491,053,062 586,772,466 1,356,974,337
Reinvest........ 3,733,876 9,851,597 2,694,503 6,629,489
Redeemed........ (1,221,228,733) (2,451,124,487) (653,238,385) (1,290,010,498)
-------------- -------------- ------------ ------------
Net increase/
(decrease)...... (17,132,610) 49,780,172 (63,771,416) 73,593,328
============== ============== ============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
32
<PAGE> 122
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
AUGUST YEAR ENDED
31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income............. 0.0258 0.0492 0.0539 0.0424 0.0287 0.0340
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------ ------ ------ ------ ------ ------
Total income from investment
operations........................ 0.0258 0.0492 0.0543 0.0197 0.0271 0.0340
Less dividends to shareholders from
net investment income............. (0.0257) (0.0490) (0.0539) (0.0422) (0.0287) (0.0341)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------ ------ ------ ------ ------ ------
Net change in net asset value per
share............................. 0.0001 0.0002 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 $ 1.00
====== ====== ====== ====== ====== ======
Total return....................... 2.59%(d) 5.01% 5.53% 4.30%+ 2.91% 3.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)........................ $ 2,258 $ 2,292 $ 2,200 $ 1,129 $ 1,216 $ 992
Ratio of expenses to average net
assets............................ 0.55%(c) 0.55% 0.55% 0.51% 0.52% 0.55%
Ratio of net investment income to
average net assets................ 5.11%(c) 4.92% 5.37% 4.19% 2.86% 3.42%
Ratio of expenses to average net
assets*........................... (b) (b) 0.56% 0.56% 0.53% (a)
Ratio of net investment income to
average net assets*............... (b) (b) 5.36% 4.14% 2.85% (a)
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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
Advisor. Without this capital contribution, the total return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
</TABLE>
See Notes to Financial Statements.
33
<PAGE> 123
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
AUGUST YEAR ENDED
31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0273 0.0524 0.0571 0.0461 0.0319 0.0372
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0232) (0.0016) --
-------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0273 0.0524 0.0575 0.0229 0.0303 0.0372
Less dividends to shareholders from
net investment income............. (0.0273) (0.0522) (0.0571) (0.0454) (0.0319) (0.0372)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
-------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- 0.0002 0.0004 0.0008 (0.0016) --
-------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= =======
Total return....................... 2.76%(d) 5.34% 5.86% 4.63%+ 3.24% 3.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 2,022 $ 1,710 $ 1,651 $ 662 $ 3,840 $ 10,301
Ratio of expenses to average net
assets.......................... 0.23%(c) 0.23% 0.23% 0.16% 0.20% 0.23%
Ratio of net investment income to
average net assets.............. 5.43%(c) 5.24% 5.69% 4.11% 3.19% 3.59%
Ratio of expenses to average net
assets*......................... (b) (b) 0.24% 0.23% 0.21% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.68% 4.04% 3.18% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
34
<PAGE> 124
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
AUGUST YEAR ENDED
31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0261 0.0499 0.0546 0.0431 0.0294 0.0345
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
-------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0261 0.0499 0.0550 0.0204 0.0278 0.0345
Less dividends to shareholders from
net investment income.............. (0.0260) (0.0497) (0.0546) (0.0429) (0.0294) (0.0347)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
-------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. 0.0001 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 $ 1.00
======== ======= ======= ======= ======= =======
Total return....................... 2.63%(d) 5.08% 5.60% 4.37%+ 2.98% 3.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 3,130 $ 2,945 $ 1,561 $ 864 $ 839 $ 793
Ratio of expenses to average net
assets.......................... 0.48%(c) 0.48% 0.48% 0.44% 0.45% 0.48%
Ratio of net investment income to
average net assets.............. 5.18%(c) 5.00% 5.44% 4.31% 2.94% 3.49%
Ratio of expenses to average net
assets*......................... (b) (b) 0.49% 0.48% 0.46% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.43% 4.27% 2.93% (a)
</TABLE>
- ---------------
* 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 Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
35
<PAGE> 125
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income.............................. 0.0245 0.0282
Net realized gains/(losses) on investment
transactions..................................... -- --
-------- --------
Total income from investment operations.............. 0.0245 0.0282
Less dividends to shareholders from net investment
income............................................. (0.0245) (0.0281)
-------- --------
Net change in net asset value per share.............. -- 0.0001
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 1.00 $ 1.00
======== ========
Total return......................................... 2.48%(d) 2.84%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............. $ 407 $ 204
Ratio of expenses to average net assets............ 0.78%(c) 0.78%(c)
Ratio of net investment income to average net
assets........................................... 4.90%(c) 4.73%(c)
Ratio of expenses to average net assets*........... (b) (b)
Ratio of net investment income to average net
assets*.......................................... (b) (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
36
<PAGE> 126
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0197
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0197
Less dividends to shareholders from net investment
income................................................. (0.0197)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 119
Ratio of expenses to average net assets................ 0.78%(c)
Ratio of net investment income to average net assets... 4.94%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from April 7, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
37
<PAGE> 127
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
Y SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0065
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0065
Less dividends to shareholders from net investment
income................................................. (0.0065)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 37
Ratio of expenses to average net assets................ 1.23%(c)
Ratio of net investment income to average net assets... 4.50%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 10, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
38
<PAGE> 128
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
AUGUST YEAR ENDED
31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0249 0.0477 0.0527 0.0405 0.0262 0.0309
Net realized gains/(losses) on
investment transactions......... -- -- 0.0011 0.0001 (0.0002) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0249 0.0477 0.0538 0.0406 0.0260 0.0309
Less dividends to shareholders from
net investment income............. (0.0247) (0.0477) (0.0527) (0.0405) (0.0262) (0.0311)
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. 0.0002 -- 0.0011 0.0001 (0.0002) (0.0002)
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.50%(d) 4.87% 5.40% 4.13% 2.65% 3.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 306 $ 411 $ 1,091 $ 1,132 $ 1,577 $ 1,746
Ratio of expenses to average net
assets.......................... 0.58%(c) 0.57% 0.57% 0.55% 0.55% 0.56%
Ratio of net investment income to
average net assets.............. 4.91%(c) 4.76% 5.24% 3.99% 2.62% 3.11%
Ratio of expenses to average net
assets*......................... (b) (b) 0.58% (a) (a) (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.23% (a) (a) (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
39
<PAGE> 129
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0264 0.0509 0.0559 0.0437 0.0294 0.0341
Net realized gains/(losses) on
investment transactions......... -- -- 0.0011 0.0001 (0.0002) 0.0002
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0264 0.0509 0.0570 0.0438 0.0292 0.0343
Less dividends to shareholders from
net investment income............. (0.0264) (0.0509) (0.0559) (0.0437) (0.0294) (0.0343)
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- -- 0.0011 0.0001 (0.0002) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.66%(d) 5.21% 5.73% 4.46% 2.98% 3.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 652 $ 618 $ 722 $ 469 $ 487 $ 598
Ratio of expenses to average net
assets.......................... 0.26%(c) 0.25% 0.25% 0.23% 0.23% 0.24%
Ratio of net investment income to
average net assets.............. 5.23%(c) 5.09% 5.56% 4.36% 2.94% 3.38%
Ratio of expenses to average net
assets*......................... (b) (b) 0.26% (a) (a) (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.55% (a) (a) (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
40
<PAGE> 130
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0251 0.0484 0.0534 0.0412 0.0269 0.0316
Net realized gains/(losses) on
investment transactions......... -- -- 0.0011 0.0001 (0.0002) 0.0002
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0251 0.0484 0.0545 0.0413 0.0267 0.0318
Less dividends to shareholders from
net investment income............. (0.0251) (0.0484) (0.0534) (0.0412) (0.0269) (0.0318)
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- -- 0.0011 0.0001 (0.0002) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.54%(d) 4.97% 5.47% 4.20% 2.72% 3.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 1,547 $ 1,557 $ 1,031 $ 364 $ 541 $ 369
Ratio of expenses to average net
assets.......................... 0.51%(c) 0.50% 0.50% 0.48% 0.48% 0.49%
Ratio of net investment income to
average net assets.............. 4.98%(c) 4.84% 5.31% 4.01% 2.69% 3.28%
Ratio of expenses to average net
assets*......................... (b) (b) 0.51% (a) (a) (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.30% (a) (a) (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
41
<PAGE> 131
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 1.00 $ 1.00
-------- --------
Income from Investment Operations:
Net investment income.............................. 0.0236 0.0271
-------- --------
Total income from investment operations.............. 0.0236 0.0271
Less dividends to shareholders from net investment
income............................................. (0.0236) (0.0271)
-------- --------
Net change in net asset value per share.............. -- --
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 1.00 $ 1.00
======== ========
Total return......................................... 2.38%(d) 2.74%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............. $ 25 $ 6
Ratio of expenses to average net assets............ 0.81%(c) 0.81%(c)
Ratio of net investment income to average net
assets........................................... 4.72%(c) 4.58%(c)
Ratio of expenses to average net assets*........... (b) (b)
Ratio of net investment income to average net
assets*.......................................... (b) (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
42
<PAGE> 132
PACIFIC HORIZON TREASURY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
Y SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD............ $ 1.00
--------
Income from Investment Operations:
Net investment income................................... 0.0173
--------
Total income from investment operations................... 0.0173
Less dividends to shareholders from net investment
income.................................................. (0.0173)
--------
Net change in net asset value per share................... --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD.................. $ 1.00
========
Total return.............................................. 2.32%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions).................. $ 9
Ratio of expenses to average net assets................. 1.27%(c)
Ratio of net investment income to average net assets.... 4.30%(c)
Ratio of expenses to average net assets*................ (b)
Ratio of net investment income to average net assets*... (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 10, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
43
<PAGE> 133
PACIFIC HORIZON GOVERNMENT FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
AUGUST YEAR ENDED
31, ---------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income........ 0.0255 0.0481 0.0530 0.0421 0.0288
Net realized gains/(losses)
on investment
transactions............... -- -- (0.0004)** (0.0091) (0.0006)
-------- -------- -------- -------- --------
Total income from investment
operations..................... 0.0255 0.0481 0.0526 0.0330 0.0282
Less dividends to shareholders
from net investment income..... (0.0249) (0.0480) (0.0524) (0.0420) (0.0288)
Increase due to voluntary
capital contribution from
Investment Advisor............. -- -- -- 0.0085 --
-------- -------- -------- -------- --------
Net change in net asset value
per share...................... 0.0006 0.0001 0.0002 (0.0005) (0.0006)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END
OF PERIOD...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return.................... 2.52%(c) 4.91% 5.37% 4.28%+ 2.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................... $ 132 $ 192 $ 261 $ 355 $ 154
Ratio of expenses to average
net assets................... 0.60%(b) 0.55% 0.56% 0.50% 0.60%
Ratio of net investment income
to average net assets........ 4.94%(b) 4.82% 5.34% 4.27% 2.88%
Ratio of expenses to average
net assets*.................. 0.65%(b) 0.61%(a) 0.63% 0.58% 0.60%
Ratio of net investment income
to average net assets*....... 4.89%(b) 4.76%(a) 5.27% 4.19% 2.88%
</TABLE>
- ---------------
* 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.
** Net realized loss for the period is a direct result of a decrease in
outstanding shares between February 28, 1995 and the date of the gain
realization.
(a) Fees paid by third parties had no effect on the ratios.
(b) Annualized.
(c) Not annualized.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Advisor. Without this capital contribution, the total return
would have been lower.
See Notes to Financial Statements.
44
<PAGE> 134
PACIFIC HORIZON GOVERNMENT FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ---------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994(b)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income..... 0.0268 0.0513 0.0600 0.0454 0.0227
Net realized
gains/(losses) on
investment
transactions............ -- -- (0.0042)** (0.0092) (0.0006)
-------- -------- -------- -------- --------
Total income from investment
operations.................. 0.0268 0.0513 0.0558 0.0362 0.0221
Less dividends to
shareholders from net
investment income........... (0.0265) (0.0512) (0.0556) (0.0452) (0.0227)
Increase due to voluntary
capital contribution from
Investment Advisor.......... -- -- -- 0.0085 --
-------- -------- -------- -------- --------
Net change in net asset value
per share................... 0.0003 0.0001 0.0002 (0.0005) (0.0006)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return................. 2.68%(d) 5.25% 5.71% 4.61%+ 2.29%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................ $ 46 $ 61 $ 55 $ 235 $ 370
Ratio of expenses to average
net assets................ 0.28%(c) 0.22% 0.24% 0.17% 0.28%(c)
Ratio of net investment
income to average net
assets.................... 5.27%(c) 5.15% 5.66% 4.67% 3.17%(c)
Ratio of expenses to average
net assets*............... 0.33%(c) 0.29%(a) 0.30% 0.25% 0.28%(c)
Ratio of net investment
income to average net
assets*................... 5.22%(c) 5.08%(a) 5.60% 4.59% 3.17%(c)
</TABLE>
- ---------------
* 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.
** Net realized loss for the period is a direct result of a decrease in
outstanding shares between February 28, 1995 and the date of the gain
realization.
(a) Fees paid by third parties had no effect on the ratios.
(b) Period from June 14, 1993 (inception date) to February 28, 1994.
(c) Annualized.
(d) Not annualized.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Advisor. Without this capital contribution, the total return
would have been lower.
See Notes to Financial Statements.
45
<PAGE> 135
PACIFIC HORIZON GOVERNMENT FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income........................ 0.0254 0.0488 0.0537 0.0429 0.0300
Net realized gains/(losses) on investment
transactions............................... -- -- (0.0004)** (0.0092) (0.0006)
------- ------- ------- ------- -------
Total income from investment operations....... 0.0254 0.0488 0.0533 0.0337 0.0294
Less dividends to shareholders from net
investment income............................ (0.0253) (0.0487) (0.0531) (0.0427) (0.0300)
Increase due to voluntary capital contribution
from Investment Advisor...................... -- -- -- 0.0085 --
------- ------- ------- ------- -------
Net change in net asset value per share....... 0.0001 0.0001 0.0002 (0.0005) (0.0006)
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return.................................. 2.56%(c) 4.98% 5.44% 4.35%+ 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)....... $ 246 $ 263 $ 213 $ 289 $ 326
Ratio of expenses to average net assets...... 0.53%(b) 0.48% 0.49% 0.43% 0.48%
Ratio of net investment income to average net
assets..................................... 5.02%(b) 4.89% 5.41% 4.32% 2.99%
Ratio of expenses to average net assets*..... 0.58%(b) 0.54%(a) 0.56% 0.51% 0.53%
Ratio of net investment income to average net
assets*.................................... 4.97%(b) 4.83%(a) 5.34% 4.24% 2.94%
</TABLE>
- ---------------
* 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.
** Net realized loss for the period is a direct result of a decrease in
outstanding shares between February 28, 1995 and the date of the gain
realization.
(a) Fees paid by third parties had no effect on the ratios.
(b) Annualized.
(c) Not annualized.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Advisor. Without this capital contribution, the total return
would have been lower.
See Notes to Financial Statements.
46
<PAGE> 136
PACIFIC HORIZON TREASURY ONLY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income........................ 0.0238 0.0458 0.0495 0.0384 0.0254
Net realized gains/(losses) on investment
transactions............................... -- 0.0001 0.0003 (0.0002) (0.0002)
------- ------- ------- ------- -------
Total income from investment operations....... 0.0238 0.0459 0.0498 0.0382 0.0252
Less dividends to shareholders from net
investment income............................ (0.0238) (0.0458) (0.0495) (0.0384) (0.0254)
------- ------- ------- ------- -------
Net change in net asset value per share....... -- 0.0001 0.0003 (0.0002) (0.0002)
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return.................................. 2.41%(d) 4.68% 5.06% 3.90% 2.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)....... $ 214 $ 225 $ 274 $ 90 $ 72
Ratio of expenses to average net assets...... 0.62%(c) 0.60% 0.63% 0.62% 0.56%
Ratio of net investment income to average net
assets..................................... 4.72%(c) 4.59% 4.94% 3.90% 2.54%
Ratio of expenses to average net assets*..... (b) (b) (a) 0.63% 0.72%
Ratio of net investment income to average net
assets*.................................... (b) (b) (a) 3.89% 2.38%
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
47
<PAGE> 137
PACIFIC HORIZON TREASURY ONLY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED PERIOD ENDED
1997 FEBRUARY 28, FEBRUARY 29,
(UNAUDITED) 1997 1996 (a)
----------- ------------ ------------
<S> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Income from Investment Operations:
Net investment income........................... 0.0254 0.0490 0.0227
Net realized gains/(losses) on investment
transactions.................................. -- 0.0001 (0.0001)
------- ------- -------
Total income from investment operations........... 0.0254 0.0491 0.0226
Less dividends to shareholders from net investment
income.......................................... (0.0254) (0.0490) (0.0227)
------- ------- -------
Net change in net asset value per share........... -- 0.0001 (0.0001)
------- ------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD.......... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total return...................................... 2.57%(e) 5.02% 2.30%(e)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions).......... $ 27 $ 30 $ 7
Ratio of expenses to average net assets......... 0.30%(d) 0.27% 0.70%(d)
Ratio of net investment income to average net
assets........................................ 5.05%(d) 4.94% 11.88%(d)
Ratio of expenses to average net assets*........ (c) (c) (b)
Ratio of net investment income to average net
assets*....................................... (c) (c) (b)
</TABLE>
- ---------------
* 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.
(a) Period from September 20, 1995 (inception date) to February 29, 1996.
(b) There were no fee waivers or expense reimbursements during the period.
(c) Fees paid by third parties had no effect on the ratios.
(d) Annualized.
(e) Not annualized.
See Notes to Financial Statements.
48
<PAGE> 138
PACIFIC HORIZON TREASURY ONLY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income........................ 0.0242 0.0465 0.0502 0.0391 0.0273
Net realized gains/(losses) on investment
transactions............................... -- 0.0001 0.0003 (0.0002) (0.0002)
------- ------- ------- ------- -------
Total income from investment operations....... 0.0242 0.0466 0.0505 0.0389 0.0271
Less dividends to shareholders from net
investment income............................ (0.0242) (0.0465) (0.0502) (0.0391) (0.0273)
------- ------- ------- ------- -------
Net change in net asset value per share....... -- 0.0001 0.0003 (0.0002) (0.0002)
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return.................................. 2.44%(d) 4.75% 5.14% 3.98% 2.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)....... $ 196 $ 260 $ 186 $ 194 $ 272
Ratio of expenses to average net assets...... 0.55%(c) 0.53% 0.56% 0.55% 0.39%
Ratio of net investment income to average net
assets..................................... 4.79%(c) 4.66% 5.01% 3.86% 2.73%
Ratio of expenses to average net assets*..... (b) (b) (a) 0.56% 0.64%
Ratio of net investment income to average net
assets*.................................... (b) (b) (a) 3.85% 2.48%
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
49
<PAGE> 139
PACIFIC HORIZON TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ---------- ---------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 104.2%
ALABAMA -- 0.8%
Mobile, Port City Medical Clinic
(LOC -- Rabobank Nederland)... VMIG1/Aaa A1+/AAA 3.70% 10/16/97 $ 4,900,000 $ 4,900,000
------------
ALASKA -- 0.4%
Valdez Term Revenue, Arco,
Series 94A.................... VMIG1/A2 A1/A 3.65% 10/24/97 2,400,000 2,400,000
------------
ARIZONA -- 2.8%
Apache County Industrial
Development, Tucson Electric
Power (LOC -- Chase Manhattan
Bank) (final maturity
6/15/20)*..................... VMIG1/A2 A1/A+ 3.35% 09/03/97 7,800,000 7,800,000
Apache County Industrial
Development, Tuscon Electric
Power,Series 83-A (LOC --
Barclays Bank)(final maturity
12/15/18)*.................... VMIG1/AA A1+/AA 3.35% 09/03/97 10,500,000 10,500,000
------------
18,300,000
------------
ARKANSAS -- 1.7%
Arkansas State Development
Authority (final maturity
1/1/19)*...................... NR/NR A1+/AAA 3.95% 09/03/97 10,860,000 10,860,000
------------
CALIFORNIA -- 5.7%
California Statewide Community
Development, Series A2 (final
maturity 5/15/25)*............ NR/NR A1+/AAA 3.05% 09/03/97 15,800,000 15,800,000
California Health Facilities
Financing Authority, Series B
(LOC -- Morgan Guaranty Trust)
(final maturity 3/1/20)*...... VMIG1/Aa1 A1+/AAA 3.40% 09/02/97 5,400,000 5,400,000
Los Angeles County Public Works,
Series A (MBIA insured)....... AAA/NR AAA/NR 4.50% 09/01/97 4,600,000 4,600,000
Newport Beach, Hoag Memorial
Presbyterian Hospital, (final
maturity 10/1/22)*............ VMIG1/A1 A1+/AA 3.40% 09/02/97 7,100,000 7,100,000
Redlands Certificates of
Participation (FGIC insured)
(final maturity 9/1/17)*...... VMIG1/AAA A1+/AAA 3.05% 09/03/97 105,000 105,000
Rocklin Unified School District
(FGIC insured)................ NR/NR SP1+/NR 4.45% 09/04/97 3,700,000 3,700,152
------------
36,705,152
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
50
<PAGE> 140
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ---- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
COLORADO -- 3.4%
Colorado Health Facilities
Authority, Sisters of Charity
Health Care System (LOC --
Toronto Dominion) (final
maturity 5/15/25)*............ VMIG1/Aa2 A1+/AA 3.35% 09/04/97 $ 1,700,000 $ 1,700,000
Colorado State Tax & Revenue
Anticipation Notes, Series A.. NR/NR SP1+/NR 4.50% 06/26/98 20,000,000 20,102,147
------------
21,802,147
------------
DELAWARE -- 0.6%
Delaware Economic Development
(final maturity 12/1/15)*..... VMIG1/Aaa A1+/AAA 3.40% 09/03/97 4,000,000 4,000,000
------------
DISTRICT OF COLUMBIA -- 5.0%
District of Columbia, Series A2
(LOC -- Canadian Imperial
Bank) (final maturity
10/1/07)*..................... VMIG1/Aa3 A1+/AA- 3.80% 09/02/97 13,300,000 13,300,000
District of Columbia, Series A3
(LOC -- Societe Generale)
(final maturity 10/1/07)*..... VMIG1/Aa3 A1+/AA+ 3.80% 09/02/97 11,000,000 11,000,000
District of Columbia, Series A5
(LOC -- Bank of Nova Scotia)
(final maturity 10/1/07)*..... VMIG1/Aa3 A1+/AA- 3.80% 09/02/97 7,800,000 7,800,000
------------
32,100,000
------------
FLORIDA -- 10.8%
Florida Board of Education
(final maturity 6/1/23)*...... NR/Aa A1+/AA 3.70% 12/01/97 9,900,000 9,900,000
Jacksonville Hospital, Baptist
Medical Center (LOC -- First
Union National Bank) (final
maturity 6/1/09)*............. VMIG1/NR A1/A+ 3.35% 09/04/97 7,000,000 7,000,000
Jacksonville Electric
Authority..................... P1/NR A1+/NR 3.60% 10/16/97 5,000,000 5,000,000
Jacksonville Pollution Control,
Florida Power & Light......... VMIG1/A2 A1/A 3.80% 10/23/97 3,000,000 3,000,000
Jacksonville Pollution Control,
Florida Power & Light......... VMIG1/A2 A1/A 3.70% 10/28/97 4,800,000 4,800,000
Lakeland Electric & Water
Revenue (FGIC insured)........ AAA/NR AAA/NR 5.25% 10/01/97 5,140,000 5,146,321
Lucie County, Florida Power &
Light......................... VMIG1/Aa3 A1+/AA 3.80% 10/22/97 9,850,000 9,850,000
Miami Health Facilities, Cedars
Medical Center, Series A
(final maturity 10/1/17)*..... NR/NR NR/NR 8.38% 10/01/97 1,000,000 1,005,690
Pasco County School Board (AMBAC
insured) (final maturity
8/1/26)*...................... VMIG1/AAA A1+/AAA 3.30% 09/04/97 7,000,000 7,000,000
Pinellas County Multi-Family
Housing, Foxbridge Apartments,
Series A (final maturity
6/15/25)*..................... NR/NR A1+/AAA 3.35% 09/03/97 5,000,000 5,000,000
Sarasota County, Hospital
District (Sarasota Hospital)
(LOC -- Suntrust bank)........ P1/Aa3 A1-/AA- 3.80% 11/18/97 5,000,000 5,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
51
<PAGE> 141
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ---- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA -- (CONTINUED)
Sunshine State (LOC -- National
Westminster-Morgan Guaranty
Trust)........................ VMIG1/Aa2 NR/NR 3.60% 10/16/97 $ 7,500,000 $ 7,500,000
------------
70,202,011
------------
GEORGIA -- 2.4%
Burke County Development
Authority Pollution Control,
Oglethorpe Power Corp., Series
A (FGIC insured) (final
maturity 1/1/19)*............. VMIG1/AAA A1+/AAA 3.25% 09/03/97 3,000,000 3,000,000
Georgia Municipal Gas Authority
(LOC -- Morgan Guaranty Trust)
(final maturity 11/1/06)*..... NR/NR A1+/AA 3.30% 09/03/97 7,800,000 7,800,000
Roswell Housing Authority (final
maturity 8/1/30)*............. NR/NR A1+/AAA 3.35% 09/03/97 5,000,000 5,000,000
------------
15,800,000
------------
IDAHO -- 0.9%
Idaho State Tax Anticipation
Notes......................... MIG1/NR SP1+/NR 4.63% 06/30/98 6,000,000 6,035,593
------------
ILLINOIS -- 9.2%
Chicago Tender Notes (LOC --
Morgan Guaranty Trust) (final
maturity 1/31/99)**........... MIG1/VMIG1 A1+/Spl+ 3.65% 02/05/98 15,000,000 15,000,000
Franklin Park (final maturity
7/1/22)* (AMBAC insured)...... NR/NR A1+/AAA 3.40% 09/04/97 7,055,000 7,055,000
Illinois Health Facilities,
Elmhurst Memorial Hospital,
Series B (LOC -- Rabobank)
(final maturity 1/1/20)*...... VMIG1/A1 NR/NR 3.70% 09/02/97 15,285,000 15,285,000
Illinois Health Facilities,
Resurrection Health Care
(final maturity 5/1/11)*...... VMIG1/A2 NR/NR 3.60% 09/02/97 17,000,000 17,000,000
Illinois Health Facilities,
Franciscan Sisters Health
(final maturity 1/1/18)*...... VMIG1/A2 NR/NR 3.70% 09/02/97 4,950,000 4,950,000
------------
59,290,000
------------
INDIANA -- 1.2%
Jasper County Pollution Control
Revenue....................... VMIG1/A2 A1/A 3.80% 10/15/97 8,000,000 8,000,000
------------
IOWA -- 0.7%
Iowa Higher Education Loan
Authority, Private College
(MBIA insured) (final maturity
12/1/15)*..................... VMIG1/Aaa A1+/AAA 3.35% 09/03/97 4,700,000 4,700,000
------------
KANSAS -- 0.4%
Wamego Pollution Control
(LOC -- Credit Suisse-First
Boston) (final maturity
3/1/26)*...................... P1/Aa3 A1+/AA 3.35% 09/03/97 2,600,000 2,600,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
52
<PAGE> 142
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ---- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
KENTUCKY -- 2.4%
Kentucky Asset/Liability Tax &
Revenue Anticipation Notes,
Series A...................... MIG1/NR SP1+/NR 4.50% 06/25/98 $10,000,000 $ 10,050,914
Kentucky Economic Development,
Sisters of Charity (final
maturity 11/1/20)*............ VMIG1/A1 A1/A+ 3.65% 09/02/97 5,600,000 5,600,000
------------
15,650,914
------------
LOUISIANA -- 3.3%
Ascension Parish, Borden Inc.
Project (LOC -- Credit Suisse)
(final maturity 12/1/09)*..... VMIG1/Aa2 A1+/AA 3.30% 09/03/97 5,500,000 5,500,000
Louisiana State General
Obligation Bonds, Tax Exempt
Eagle Trust, Series 1994
(AMBAC insured) (final
maturity 5/1/09)*............. NR/NR A1/AA 3.46% 09/04/97 11,600,000 11,600,000
Plaquemines Port Harbor & Term
District, Chevron Pipe Line
Company (final maturity
9/1/08)*...................... P1/Aa3 AA/NR 4.05% 03/01/98 4,000,000 4,000,000
------------
21,100,000
------------
MARYLAND -- 0.3%
Baltimore Industrial Development
(LOC -- Wachovia Bank) (final
maturity 12/1/16)*............ P1/Aa2 NR/NR 3.40% 09/04/97 1,715,000 1,715,000
------------
MASSACHUSETTS -- 0.5%
Massachusetts Health and
Education Authority, Capital
Assets, Series D (MBIA
insured) (final maturity
1/1/35)*...................... VMIG1/AAA A1+/AAA 3.65% 09/02/97 3,000,000 3,000,000
------------
MICHIGAN -- 2.1%
Farmington Hills Hospital
Finance Authority, Botsford
General Hospital, Series B
(MBIA insured) (final maturity
2/15/16)*..................... VMIG1/Aaa A1/AAA 3.65% 09/02/97 3,800,000 3,800,000
Michigan Municipal Bond
Authority, Series 97-B........ NR/NR NR/SP1+ 4.50% 07/02/98 10,000,000 10,056,136
------------
13,856,136
------------
MINNESOTA -- 1.3%
Cohasset Revenue, Minnesota
Power & Light Co. (LOC -- ABN
AMRO Bank N.V.) (final
maturity 6/1/13)*............. NR/NR A1+/AA+ 3.70% 09/01/97 1,000,000 1,000,000
Duluth Tax Increment Revenue,
Lake Superior Paper (LOC --
Wachovia Bank) (final maturity
9/1/10)*...................... MIG1/Aa2 A1+/AA+ 3.35% 09/04/97 4,100,000 4,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
53
<PAGE> 143
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ---- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
MINNESOTA -- (CONTINUED)
St. Cloud Health Care Facilities
(final maturity 7/1/27)*
(LOC -- Rabobank Nederland)... P1/Aaa A1+/AAA 3.40% 09/04/97 $ 3,000,000 $ 3,000,000
------------
8,100,000
------------
MISSOURI -- 2.4%
Columbia Water & Electric,
Series B (LOC -- Toronto
Dominion Bank) (final maturity
12/1/15)*..................... VMIG1/Aa2 A1+/AA 3.30% 09/03/97 1,400,000 1,400,000
Missouri Health & Education, The
Washington University Project,
Series 96A (final maturity
9/1/30)*...................... VMIG1/Aa1 A1+/AA 3.75% 09/02/97 2,300,000 2,300,000
Missouri State Health &
Educational Authority, Series
B (MBIA insured) (final
maturity 6/1/22)*............. NR/AAA A1+/AAA 3.35% 09/03/97 2,000,000 2,000,000
Missouri State Infrastructure
Facilities, Midtown
Redevelopment Project
(LOC -- Dai-Ichi Kangyo, Los
Angeles) (final maturity
12/1/18)*..................... VMIG1/A1 NR/NR 3.60% 09/02/97 10,000,000 10,000,000
------------
15,700,000
------------
NEBRASKA -- 0.5%
Nebraska Educational Facilities
(FGIC insured) (final maturity
12/1/00)*..................... VMIG1/AAA A1/AAA 3.30% 09/03/97 3,435,000 3,435,000
------------
NEW MEXICO -- 1.4%
Albuquerque Gross Receipts,
Lodgers Tax Revenue (LOC --
Canadian Imperial Bank) (final
maturity 7/1/22)*............. Aa3/VMIG1 AA/A1+ 3.30% 09/03/97 1,200,000 1,200,000
New Mexico State Highway
Commission (FSA insured)
(final maturity 6/15/11)*..... VMIG1/Aaa A1+/AAA 3.30% 09/03/97 8,000,000 8,000,000
------------
9,200,000
------------
NEW YORK -- 4.6%
New York City Water & Sewer
Systems (final maturity
6/15/23)*..................... NR/NR A1+/AAA 3.45% 09/03/97 10,000,000 10,000,000
New York State Transportation
Authority (final maturity
4/1/10)*...................... VMIG1/AAA NR/NR 3.40% 09/03/97 9,900,000 9,900,000
New York State Energy Research &
Development, Pollution
Control, New York State
Electric & Gas Corp.
(LOC -- Morgan Guaranty)
(final maturity 6/1/29)*...... VMIG1/Aa1 A1+/AAA 3.65% 09/02/97 10,000,000 10,000,000
------------
29,900,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
54
<PAGE> 144
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ---- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA -- 7.8%
Charlotte Airport Revenue,
Series 93A (MBIA insured)
(final maturity 7/1/16)*...... VMIG1/Aaa A1+/AAA 3.25% 01/01/98 $10,280,000 $ 10,280,000
Lenoir County Hospital Revenue,
Lenoir Memorial Hospital
(LOC -- Wachovia Bank) (final
maturity 10/1/12)*............ VMIG1/AA2 NR/NR 3.40% 09/04/97 3,400,000 3,400,000
North Carolina Easton Municipal
Power (LOC -- Canadian
Imperial Bank of Commerce).... P1/Aa3 A1+/AA 3.55% 10/30/97 10,000,000 10,000,000
North Carolina Easton Municipal
Power (LOC -- Canadian
Imperial Bank of Commerce).... P1/Aa3 A1+/AA 3.70% 11/13/97 6,200,000 6,200,000
North Carolina Medical Care
Commission, Pooled Equipment
Financing Project, (MBIA
insured) (final maturity
12/1/25)*..................... VMIG1/AAA A2/AAA 3.55% 12/01/97 1,300,000 1,300,000
North Carolina Retirement
Community (LOC -- LaSalle
National Bank) (final maturity
11/15/09)*.................... NR/NR A1+/AA+ 3.38% 09/02/97 10,000,000 10,000,000
Wake County Pollution Control,
Carolina Power & Light Co.
Project, Series B (LOC --
Sumitomo Bank) (final maturity
9/1/15)*...................... VMIG1/A1+ NR/NR 3.45% 09/03/97 7,300,000 7,300,000
Wake County Pollution Control,
Carolina Power & Light Co.
Project, Series C (LOC --
Sumitomo Bank) (final maturity
10/1/15)*..................... P1/NR A1+/NR 3.45% 09/03/97 2,300,000 2,300,000
------------
50,780,000
------------
NORTH DAKOTA -- 0.5%
Grand Forks Hospital Facilities,
United Hospital (LOC --
LaSalle National Bank) (final
maturity 12/1/16)*............ VMIG1/A1 NR/NR 3.65% 09/02/97 3,340,000 3,340,000
------------
OHIO -- 0.4%
Hamilton County Hospital
Facilities Bethesda Hospital,
Inc. (LOC -- Rabobank
Nederland) (final maturity
2/15/24)*..................... VMIG1/Aaa A1+/AAA 3.20% 09/04/97 2,600,000 2,600,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
55
<PAGE> 145
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ---- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA -- 7.1%
Allegheny County Industrial
Development, Duquesne Light
Co., Series A (LOC -- Canadian
Imperial Bank of Commerce)
(final maturity 9/1/11)*...... NR/P1 AA-/A1+ 3.65% 10/30/97 $ 8,225,000 $ 8,225,000
Allegheny County Industrial
Development, Duquesne Light
Co., Series A (LOC -- Canadian
Imperial Bank of Commerce)
(final maturity 9/1/11)*...... NR/P1 AA-/A1+ 3.65% 10/30/97 3,700,000 3,700,000
Delaware Valley Finance
Authority (LOC -- Credit
Suisse) (final maturity
12/1/19)*..................... VMIG1/Aa3 A1+/AA 3.25% 09/02/97 3,000,000 3,000,000
Emmaus General Authority, Series
B (final maturity 3/1/24)*.... NR/NR NR/NR 3.35% 09/03/97 2,200,000 2,200,000
Quakertown General Authority,
Series A (LOC -- PNC Bank)
(final maturity 7/1/26)*...... VMIG1/A1 NR/NR 3.45% 09/02/97 18,600,000 18,600,000
Quakertown Hospital Authority,
HPS Group Pooled Financing
(LOC -- PNC Bank) (final
maturity 7/1/05)*............. VMIG1/A1 NR/NR 3.45% 09/02/97 10,000,000 10,000,000
------------
45,725,000
------------
RHODE ISLAND -- 0.7%
Rhode Island Housing, Series
22-A (FGIC insured) (final
maturity 4/1/27)*............. VMIG1/AA2 A1+/AA+ 3.65% 12/02/97 4,615,000 4,615,000
------------
SOUTH CAROLINA -- 3.1%
South Carolina Public Service
Authority..................... P1/Aa A1/AA- 3.80% 10/22/97 10,000,000 10,000,000
South Carolina Public Service
Authority..................... P1/Aa A1/AA- 3.65% 11/20/97 10,000,000 10,000,000
------------
20,000,000
------------
TENNESSEE -- 6.0%
Bristol Health & Education
Facilities, Series 95A (final
maturity 3/1/14)* (FGIC
insured)...................... NR/NR A1/AAA 3.45% 09/03/97 8,500,000 8,500,000
Johnson City (final maturity
5/1/21)* (FGIC insured)....... NR/NR A1+/AAA 3.50% 09/03/97 9,775,000 9,775,000
Metropolitan Government
Nashville & Davidson County
Health & Education Facilities,
Adventist/Sunbelt, Series A
(LOC -- Suntrust Bank) (final
maturity 11/15/26)*........... VMIG1/Aa3 A1+/AA- 3.38% 09/04/97 9,500,000 9,500,000
Shelby County General Obligation
(FSA insured) (final maturity
11/1/21)*..................... NR/NR A1+/AAA 3.40% 09/04/97 11,200,000 11,200,000
------------
38,975,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
56
<PAGE> 146
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ---- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
TEXAS -- 7.6%
Bexar County Housing Authority
(final maturity 9/15/26)*..... NR/NR AAA/A1+ 3.35% 09/03/97 $ 3,275,000 $ 3,275,000
Brownsville Texas Utility System
(LOC -- Toronto Dominion)..... P1/Aa2 A1+/AA 3.80% 10/29/97 8,500,000 8,500,000
Grand Prairie, Housing Lincoln
Property Co. (final maturity
6/1/10)*...................... NR/NR A1+/AAA 3.40% 09/03/97 6,700,000 6,700,000
Gulf Coast Waste Disposal,
Pollution Control, Exxon
Project (final maturity
6/1/20)*...................... VMIG1/Aaa A1+/AAA 3.70% 09/03/97 2,100,000 2,100,000
Harris County Health Facilities,
Memorial Hospital (final
maturity 6/1/24)*............. VMIG1/Aaa A1+/AAA 3.25% 09/03/97 3,500,000 3,500,000
North Texas Water District
(AMBAC insured) (final
maturity 6/1/02)*............. NR/AAA NR/AAA 7.65% 06/01/98 2,280,000 2,357,694
Texas Department of Housing..... NR/NR A1+/NR 3.50% 09/17/97 8,450,000 8,450,000
Texas Department of Housing..... NR/NR A1+/NR 3.60% 09/17/97 1,060,000 1,060,000
Texas State Tax & Revenue
Anticipation Notes............ MIG1/NR SP1+/NR 4.75% 08/31/98 12,000,000 12,104,115
University of Texas............. P1/NR A1+/NR 3.65% 11/18/97 1,440,000 1,440,000
------------
49,486,809
------------
UTAH -- 3.6%
Intermountain Power Agency,
Power Supply Revenue
(LOC -- Swiss Bank) (final
maturity 7/1/14)*............. VMIG1/Aa1 A1+/AA+ 3.50% 09/15/97 5,500,000 5,500,000
Intermountain Power Agency,
Power Supply Revenue (final
maturity 7/1/03)*............. VMIG1/AAA NR/NR 3.45% 09/03/97 9,900,000 9,900,000
Utah State Housing Finance
Agency, Single Family, Series
4 (final maturity 1/1/28)*.... VMIG1/Aa1 NR/NR 3.45% 09/03/97 8,000,000 8,000,000
------------
23,400,000
------------
VERMONT -- 0.7%
Vermont Education & Health
Building, Middlebury College
(final maturity 5/1/28)*...... NR/Aa A1+/AA 3.95% 09/03/97 4,700,000 4,700,000
------------
WISCONSIN -- 1.0%
Carlton Pollution Control
Revenue, Wisconsin Power and
Light Co. (final maturity
9/01/05)*..................... VMIG1/Aa2 A1+/AA 3.60% 09/02/97 1,400,000 1,400,000
Wisconsin Transportation
(LOC -- Bayerische
Landesbank)................... P1/Aaa A1+/AAA 3.70% 11/05/97 5,105,000 5,105,000
------------
6,505,000
------------
WYOMING -- 0.9%
Sweetwater County Pollution
Control, Pacificorp 84
(LOC -- Deutsche Bank) (final
maturity 12/1/14)*............ P1/Aa1 A1+/AAA 3.60% 12/01/2014 2,500,000 2,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
57
<PAGE> 147
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----------- ----------- ---- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
WYOMING -- (CONTINUED)
Uinta County Pollution Control,
Chevron Inc. Project (final
maturity 12/1/22)*............ P1/Aa2 NR/NR 3.80% 12/01/22 $ 3,400,000 $ 3,400,000
------------
5,900,000
------------
TOTAL INVESTMENTS (AMORTIZED COST
$675,378,762)(a) -- 104.2%...... 675,378,762
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (4.2%)................ (26,934,255)
------------
NET ASSETS -- 100.0%............. $648,444,507
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $648,444,507.
(a) Cost for federal income tax and financial reporting purposes is
substantially the same.
AMBAC -- AMBAC Indemnity Corporation.
FGIC -- Financial Guaranty Insurance Company.
FSA -- Financial Security Assurance.
LOC -- Letter of Credit.
MBIA -- Municipal Bond Insurance Association.
NR -- No rating assigned by Moody's or S&P.
*Variable rate security. Maturity date reflects the next rate change date.
**Security includes put feature. Maturity date reflects the next put date.
+The ratings provided consist of short-term and long-term ratings.
See Notes to Financial Statements.
58
<PAGE> 148
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------------------- ------------ ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 99.9%
CALIFORNIA -- 99.1%
California Counties Industrial
Development Authority (LOC --
California State Teachers
Retirement) (final maturity
9/1/08)*.......................... NR/NR A1+/AA+ 3.25% 09/01/97 $ 1,175,000 $ 1,175,000
California Department of Water..... P1/Aa A1+/AA 3.35% 09/11/97 2,039,000 2,039,000
California General Obligation...... P1/A A/A+ 3.65% 09/19/97 5,000,000 5,000,000
California General Obligation...... P1/A A/A+ 3.55% 10/30/97 10,750,000 10,750,000
California General Obligation...... P1/A A/A+ 3.60% 10/09/97 14,000,000 14,000,000
California General Obligation...... P1/A A/A+ 3.55% 10/09/97 2,500,000 2,500,000
California General Obligation
(final maturity 4/1/04)*.......... NR/NR A1+/AAA 3.70% 09/15/97 15,100,000 15,100,000
California General Obligation,
Class A (final maturity 2/1/06)*.. A1+/AA NR/NR 3.36% 09/04/97 10,000,000 10,000,000
California Health Facilities
Authority, Sutter Health, Series C
(FSA insured) (final maturity
7/1/22)*.......................... AAA/NR A1+/AAA 3.40% 09/02/97 1,800,000 1,800,000
California Health Facilities
Financing Authority, Children's
Hospital (MBIA insured) (final
maturity 11/1/21)*................ VMIG1/AAA A1+/AAA 3.00% 09/03/97 1,900,000 1,900,000
California Housing Agency, Multi-
Family Housing (final maturity
7/15/13)*......................... NR/NR A1+/AAA 3.00% 09/03/97 2,600,000 2,600,000
California Local Government Agency,
Certificates of Participation
(LOC -- Fuji Bank, Ltd.) (final
maturity 8/1/16)*................. VMIG1/A1 NR/NR 3.30% 09/03/97 3,200,000 3,200,000
California Pollution Control
Financing Authority, Atlantic
Richfield Project, Series A (AMT)
(final maturity 12/1/24)*......... VMIG1/A2 A1/A 3.55% 09/02/97 8,800,000 8,800,000
California Pollution Control
Financing Authority, Chevron USA,
Inc. Project, Callable 10/9/97@100
(final maturity 11/15/01)*........ AA2/NR AA/NR 3.90% 11/15/97 2,405,000 2,408,925
California Pollution Control
Financing Authority, Colmac Energy
Project, Series A (AMT)
(LOC -- Swiss Bank) (final
maturity 12/1/16)*................ NR/NR A1+/AA+ 3.00% 09/03/97 2,300,000 2,300,000
California Pollution Control
Financing Authority, Delano Power
Project (AMT) (LOC -- Algemene
Bank Nederland) (final maturity
8/1/19)*.......................... P1/Aa1 NR/NR 3.55% 09/02/97 5,100,000 5,100,000
California Pollution Control
Financing Authority, Delano
Project (final maturity 8/1/19)*.. P1/Aa1 NR/NR 3.55% 09/02/97 3,400,000 3,400,000
</TABLE>
- ---------------
See Notes to Financial Statements.
59
<PAGE> 149
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Pollution Control
Financing Authority, Dow Chemical
Project........................... P1/NR A1/NR 3.55% 10/09/97 $ 2,300,000 $ 2,300,000
California Pollution Control
Financing Authority, Equity
Stanislaus Project (LOC -- Swiss
Bank) (final maturity 12/1/17)*... VMIG1/AA1 A1+/AA+ 3.45% 09/02/97 1,600,000 1,600,000
California Pollution Control
Financing Authority, Honey Lake
Power Company Project (LOC --
Banque Nationale, Paris) (final
maturity 9/1/18)*................. P1/AA3 NR/NR 3.55% 09/02/97 5,300,000 5,300,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Banque Nationale,
Paris) (final maturity
11/1/26)*......................... NR/NR A1+/AA+ 3.50% 09/02/97 9,200,000 9,200,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Rabobank
Nederland) (final maturity
12/1/16)*......................... NR/NR A1+/AAA 3.10% 09/03/97 11,500,000 11,500,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Swiss Bank
Corporation) (final maturity
12/1/16)*......................... NR/NR A1+/AAA 3.05% 09/03/97 32,000,000 32,000,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (LOC -- Toronto Dominion
Bank) (final maturity 12/1/18)*... NR/NR A1+/AAA 3.50% 09/02/97 2,800,000 2,800,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric (final maturity
2/1/16)*.......................... P1/A1 A1/A 3.50% 09/02/97 23,100,000 23,100,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric, Series D,
(LOC -- UBS)...................... A1+/AA NR/NR 3.65% 10/21/97 15,000,000 15,000,000
California Pollution Control
Financing Authority, Pacific Gas &
Electric, Series D,
(LOC -- UBS)...................... A1+/AA NR/NR 3.70% 10/23/97 5,000,000 5,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Martinez Project, Series A
(AMT) (final maturity 10/1/24)*... VMIG1/Aa1 NR/NR 3.45% 09/02/97 1,000,000 1,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Martinez Project, Series B
(AMT) (final maturity 10/1/31)*... VMIG1/AA1 A1+/AAA 3.05% 09/03/97 6,000,000 6,000,000
California Pollution Control
Financing Authority, Shell Oil
Company Project (final maturity
10/1/11)*......................... VMIG1/AA1 A1+/AAA 3.40% 09/02/97 1,000,000 1,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
60
<PAGE> 150
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Pollution Control
Financing Authority, Solid Waste
Disposal Revenue Bond, Taorimina
Industries, Inc. (AMT)
(LOC -- Sanwa Bank, Los Angeles,
Sanwa Bank, Ltd.) (final maturity
8/1/14)*.......................... VMIG1/AA3 NR/NR 3.15% 09/03/97 $ 5,500,000 $ 5,500,000
California Pollution Control
Financing Authority, Solid Waste
Disposal Revenue Bond, Taormina
Industries, Series B (AMT)
(LOC -- Sanwa Bank, Los Angeles,
Sanwa Bank, Ltd.) (final maturity
8/1/14)*.......................... VMIG1/Aa3 NR/NR 3.15% 09/03/97 2,260,000 2,260,000
California Pollution Control
Financing Authority, Southern
California Edison................. F1/A1 A1/A+ 3.50% 11/19/97 14,000,000 14,000,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85C..... P1/A1 A1/A+ 3.60% 10/10/97 3,300,000 3,300,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85C..... P1/A1 A1/A+ 3.55% 10/16/97 2,000,000 2,000,000
California Pollution Control
Financing Authority, Southern
California Edison, Series 85D..... P1/A1 A1/A+ 3.50% 11/20/97 6,200,000 6,200,000
California School Cash Reserve
Program, Series A................. MIG1/NR SP1+/NR 4.75% 07/02/98 30,000,000 30,216,381
California State................... P1/P2 A1/A+ 3.60% 10/23/97 2,700,000 2,700,000
California State Department of
Water (final maturity 12/1/29)*... NR/AA A+/AA 3.31% 09/04/97 8,300,000 8,300,000
California State Municipal Receipts
(AMBAC insured) (final maturity
6/1/21)*.......................... A1+/AAA A1+/AAA 3.40% 09/03/97 15,950,000 15,950,000
California State Municipal Receipts
(FGIC insured) (final maturity
8/1/19)*.......................... A1+/AAA A1+/AAA 3.30% 09/04/97 7,175,000 7,175,000
California State Municipal Receipts
(FGIC insured) (final maturity
9/1/21)*.......................... A1+/AAA A1+/AAA 3.30% 09/03/97 3,875,000 3,875,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-1
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 2,000,000 2,000,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-2
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 9,200,000 9,200,000
California Statewide Community
Development Authority, Apartment
Development Revenue, Series A-7
(final maturity 5/15/25)*......... NR/NR A1+/AAA 3.05% 09/03/97 2,800,000 2,800,000
California Statewide Community
Development Authority, Calsonic
Project (LOC -- Union Bank of
California) (final maturity
8/1/08)*.......................... F1+/AA- NR/NR 3.40% 09/03/97 7,000,000 7,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
61
<PAGE> 151
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
California Statewide Community
Development Authority,
Certificates of Participation
(LOC -- Dresdner Bank) (final
maturity 6/1/26)*................. VMIG1/AA1 NR/NR 3.40% 09/02/97 $12,600,000 $ 12,600,000
California Statewide Community
Development Authority, Contech
Construction Project (LOC -- Bank
of Tokyo) (final maturity
5/1/09)*.......................... NR/NR A1+/AA+ 3.25% 09/03/97 1,440,000 1,440,000
California Statewide Community
Development Authority, Chevron
USA, Inc. Project (final maturity
12/15/24)*........................ P1/Aa2 NR/NR 3.50% 09/02/97 3,200,000 3,200,000
Chula Vista Industrial Development,
San Diego Gas & Electric Company,
Series B (AMT) (final maturity
12/1/27)*......................... VMIG1/A1 A1/A+ 3.15% 09/03/97 11,000,000 11,000,000
Chula Vista Multi-Family Housing,
Terra Nova Project, Series A
(LOC -- Industrial Bank of Japan)
(final maturity 3/1/05)*.......... NR/NR A1/A 3.20% 09/03/97 5,000,000 5,000,000
Chula Vista, San Diego Gas &
Electric, Series 92C (AMT)........ P1/A1 A1/A+ 3.75% 10/23/97 3,000,000 3,000,000
Contra Costa County Multi-Family
Housing, Park Regency, Series A
(final maturity 8/1/32)*.......... NR/NR A1+/A 3.20% 09/03/97 8,000,000 8,000,000
Contra Costa County Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 07/01/98 10,000,000 10,053,544
Foothill Eastern Toll Road, Series
B (LOC -- Morgan Guaranty Trust)
(final maturity 1/2/35)*.......... NR/NR A1+/AAA 3.10% 09/04/97 13,500,000 13,500,000
Foothill Eastern Toll Road, Series
D (LOC -- Industrial Bank of
Japan) (final maturity 1/2/35)*... A1/A F1+/AA 3.00% 09/04/97 6,300,000 6,300,000
Foothill Eastern Toll Road, Series
E (LOC -- Banque Nationale, Paris)
(final maturity 1/2/35)*.......... NR/NR A1+/A+ 3.00% 09/04/97 5,000,000 5,000,000
Fremont Certificates of
Participation,Building & Equipment
Financing Project (LOC -- Sumitomo
Bank, Ltd.) (final maturity
7/1/15)*.......................... NR/NR A1/A 3.20% 09/04/97 4,125,000 4,125,000
Fremont Certificates of
Participation (LOC -- Sumitomo
Bank, Ltd.) (final maturity
8/1/22)*.......................... NR/NR A1/A 3.20% 09/04/97 3,100,000 3,100,000
Fremont Multi-Family Housing
Authority, Mission Wells Project
(LOC -- Industrial Bank of Japan)
(final maturity 9/1/07)*.......... NR/NR A1/A 3.20% 09/04/97 6,700,000 6,700,000
Fremont School District, Alameda
County (final maturity 8/1/20)*... NR/NR A1+/AAA 3.35% 09/04/97 6,150,000 6,150,000
Grand Terrace Community
Redevelopment Agency, Mt. Vernon
Villas (LOC -- Industrial Bank of
Japan) (final maturity
12/1/11)*......................... NR/NR A1/A 3.40% 09/03/97 1,650,000 1,650,000
</TABLE>
- ---------------
See Notes to Financial Statements.
62
<PAGE> 152
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Huntington Beach Multi-Family
Housing, Huntington Breakers,
Series A (LOC -- Sumitomo Bank,
Ltd.) (final maturity 7/1/14)*.... VMIG1/A1 NR/NR 3.20% 09/03/97 $10,300,000 $ 10,300,000
Indio Multi-Family Housing, Western
Federal Savings Project
(LOC -- Wells Fargo & Co.) (final
maturity 6/1/05)*................. NR/NR A1/A+ 3.15% 09/04/97 2,950,000 2,950,000
Irvine Improvement Board Act 1915,
District 94-15 (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
9/2/20)*.......................... VMIG1/A1 A1/A 3.45% 09/02/97 4,733,000 4,733,000
Irvine Improvement Board Act 1915,
District 95-12, Series A (LOC --
Kredietbank N.V.) (final maturity
9/2/21)*.......................... VMIG1/AA2 A1+/AA- 3.40% 09/02/97 3,350,000 3,350,000
Irvine Ranch Water District
Certificates of Participation,
Capital Improvement Project
(LOC -- Toronto Dominion) (final
maturity 8/1/16)*................. VMIG1/AA2 NR/NR 3.40% 09/02/97 2,300,000 2,300,000
Irvine Ranch Water District
(LOC -- Landesbank Hessen) (final
maturity 10/1/10)*................ NR/NR A1+/AAA 3.40% 09/02/97 1,200,000 1,200,000
Long Beach Health Services,
Memorial Health Service (final
maturity 10/1/16)*................ VMIG1/A1 A1+/AA- 3.00% 09/03/97 9,200,000 9,200,000
Los Angeles Community Redevelopment
Agency, Academy Village Apartments
(LOC -- Swiss Bank) (final
maturity 10/1/19)*................ VMIG1/AA1 NR/NR 3.15% 09/02/97 15,000,000 15,000,000
Los Angeles Community Redevelopment
Agency, Grand Promenade Project
(LOC -- Tokai Bank, Ltd.) (final
maturity 12/1/10)*................ NR/NR A1+/AAA 3.05% 09/02/97 14,900,000 14,900,000
Los Angeles County (AMT)
(LOC -- National Westminster Bank,
PLC).............................. P1/A1+ NR/NR 3.80% 09/11/97 15,000,000 15,000,000
Los Angeles County (AMT)
(LOC -- National Westminster Bank,
PLC).............................. P1/A1+ NR/NR 3.70% 09/11/97 6,000,000 6,000,000
Los Angeles County, Capital Asset
Lease Corp. (LOC -- Morgan
Guaranty Trust)................... P1/A1+ NR/NR 3.75% 10/22/97 10,000,000 10,000,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB1 (FSA insured) (final maturity
7/1/25)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 3,500,000 3,500,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB2(FSA insured) (final maturity
7/1/21)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 23,000,000 23,000,000
Los Angeles County Metropolitan
Transportation Authority, Series
SGB3(FSA insured) (final maturity
7/1/16)*.......................... NR/NR A1+/AAA 3.30% 09/04/97 5,400,000 5,400,000
</TABLE>
- ---------------
See Notes to Financial Statements.
63
<PAGE> 153
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles County Metropolitan
Transportation Authority, Series
SG-54 (AMBAC insured) (final
maturity 7/1/17)*................. NR/NR A1+/AAA 3.45% 09/03/97 $ 2,100,000 $ 2,100,000
Los Angeles County Multi-Family
Housing, Channel Gateway
Apartments (LOC -- Fuji Bank,
Ltd.) (final maturity 8/1/19)*.... VMIG1/A1 NR/NR 3.90% 09/04/97 6,700,000 6,700,000
Los Angeles County Multi-Family
Housing, Sandi Canyon Villas (AMT)
(LOC -- Industrial Bank of Japan)
(final maturity 11/1/09)*......... VMIG1/A2 NR/NR 3.45% 09/03/97 2,000,000 2,000,000
Los Angeles County Multi-Family
Housing, Studio Colony (LOC --
Industrial Bank of Japan) (final
maturity 5/16/07)*................ VMIG1/A2 NR/NR 3.20% 09/04/97 2,100,000 2,100,000
Los Angeles County Public Water
Financing Authority, Series A
(MBIA insured).................... AAA/NR AAA/NR 4.50% 09/01/97 5,000,000 5,000,000
Los Angeles County Sales Tax
Revenue, Series A (FGIC insured)
(final maturity 7/1/12)*.......... VMIG1/AAA A1/NR 09/03/97 1,400,000 1,400,000
Los Angeles County, Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 06/30/98 15,000,000 15,077,657
Los Angeles County Metropolitan
Transportation Authority (LOC --
National Westminster Bank, PLC)... P1/A1+ NR/NR 3.45% 09/25/97 6,000,000 6,000,000
Los Angeles County Wastewater
Project (LOC -- Morgan Guaranty
Trust)............................ P1/A1+ NR/NR 3.50% 09/05/97 15,000,000 15,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.75% 10/09/97 9,000,000 9,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.70% 10/09/97 10,000,000 10,000,000
Los Angeles Department of Water and
Power (LOC -- Bank of Nova
Scotia)........................... P1/A1+ NR/NR 3.90% 10/15/97 10,000,000 10,000,000
Los Angeles Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 06/30/98 15,000,000 15,071,559
Los Angeles Unified School
District, Tax & Revenue
Anticipation Notes, Series B...... MIG1/NR SP1+/NR 4.50% 09/30/97 8,500,000 8,505,597
Marin County CA Tax & Revenue
Anticipation Notes................ MIG1/NR NR/NR 4.50% 07/31/98 20,000,000 20,114,442
Modesto Irrigation District........ VMIG1/A A/NR 3.60% 10/15/97 3,000,000 3,000,000
Modesto Irrigation District,
Certificates of Participation..... VMIG1/A A1/NR 3.50% 10/20/97 5,000,000 5,000,000
Modesto Multi-Family Housing, Live
Oaks Apartments Project (final
maturity 9/1/24)*................. NR/NR A1+/AAA 3.05% 09/03/97 1,400,000 1,400,000
Monterey County Financing
Authority, Reclamation and
Distribution Project (LOC -- Dai-
Ichi Kangyo, Los Angeles) (final
maturity 9/1/36)*................. VMIG1/A1 NR/NR 3.25% 09/04/97 6,100,000 6,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
64
<PAGE> 154
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Monterey Peninsula Water Management
District, Wastewater Reclamation
Project (LOC -- Sumitomo Bank,
Ltd.) (final maturity 7/1/22)*.... VMIG1/A1 A1/A 3.20% 09/04/97 $16,300,000 $ 16,300,000
Newport Beach, Hoag Memorial
Hospital (final maturity
10/1/22)*......................... VMIG1/A1 A1+/AA 3.40% 09/02/97 20,090,000 20,090,000
Newport Beach, Hoag Memorial
Hospital, Series A (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 13,400,000 13,400,000
Newport Beach, Hoag Memorial
Hospital, Series B (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 1,600,000 1,600,000
Newport Beach, Hoag Memorial
Hospital, Series C (final maturity
10/1/26)*......................... NR/NR A1+/AA 3.40% 09/02/97 22,800,000 22,800,000
Oakland, Children's Hospital
Medical Center, Series B (LOC --
Banque Nationale, Paris) (final
maturity 7/1/99)*................. NR/NR A1/A+ 3.00% 09/03/97 3,100,000 3,100,000
Orange County, Pointe Niguel
Project, Series C (LOC -- First
Interstate Bancorp) (final
maturity 11/1/05)*................ VMIG1/AA3 NR/NR 3.35% 09/04/97 13,000,000 13,000,000
Orange County Housing Authority,
Costa Partner Development, Series
BB (LOC -- Chase/Chemical Bank)
(final maturity 12/1/09)*......... VMIG1/Aa2 NR/NR 3.05% 09/02/97 12,200,000 12,200,000
Orange County Sanitation,
Certificates of Participation,
Series C (FGIC Insured) (final
maturity 8/1/17)*................. VMIG1/AAA A1+/AAA 3.55% 09/02/97 20,650,000 20,650,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.50% 11/19/97 2,000,000 2,000,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.65% 11/06/97 4,000,000 4,000,000
Orange County Water (LOC -- Union
Bank of Switzerland).............. P1/Aaa A1+/AA+ 3.65% 09/04/97 1,500,000 1,500,000
Otay Water District, Certificates
of Participation
(LOC -- Landesbank Hessen) (final
maturity 9/1/26)*................. VMIG1/AAA A1+/AAA 3.05% 09/03/97 2,200,000 2,200,000
Placer Unified High School District
Tax & Revenue Anticipation
Notes............................. MIG1/NR SP1+/NR 4.45% 09/04/97 3,700,000 3,700,152
Redlands Certificates of
Participation, Water Treatment
Facilities Project, (FGIC Insured)
(final maturity 9/1/17)*.......... VMIG1/AAA F1+/AAA 3.05% 09/03/97 3,515,000 3,515,000
Redlands Certificates of
Participation (FGIC Insured)
(final maturity 9/1/15)*.......... VMIG1/AAA A1+/AAA 3.05% 09/03/97 2,500,000 2,500,000
Riverside County Industrial
Development, Advanced Business
Forms, Inc. Project (AMT)
(LOC -- First National Bank)
(final maturity 4/1/14)*.......... VMIG1/AAA NR/NR 3.00% 09/04/97 1,500,000 1,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
65
<PAGE> 155
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Riverside County Industrial
Development, Cryogenic Project,
Issue B (AMT) (LOC -- Rabobank
Nederland) (final maturity
7/5/14)*.......................... VMIG1/AAA NR/NR 3.00% 09/04/97 $ 1,400,000 $ 1,400,000
Riverside County Industrial
Development, Riverfront/Crest
Steel (AMT) (LOC -- First National
Bank) (final maturity 4/1/09)*.... VMIG1/AAA NR/NR 3.00% 09/04/97 2,950,000 2,950,000
Riverside County Transportation
(LOC -- Union Bank of
Switzerland)...................... P1/A1 A1/A 3.55% 09/04/97 2,000,000 2,000,000
Riverside County Transportation
Sales Tax Revenue (LOC --
Industrial Bank of Japan)......... P1/A1 A1/A 3.75% 10/07/97 3,000,000 3,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.60% 10/17/97 5,000,000 5,000,000
Sacramento County Multi-Family
Housing, Series A (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
4/15/07)*......................... VMIG1/A1 A1/A+ 3.25% 09/04/97 15,400,000 15,400,000
Sacramento County Multi-Family
Housing, Series C (LOC -- Dai-Ichi
Kangyo Bank, Ltd.) (final maturity
4/15/07)*......................... VMIG1/A1 A1/A+ 3.25% 09/04/97 1,600,000 1,600,000
Sacramento County Municipal Note
Utility District (LOC --
Bayerische Landesbank)............ P1/Aaa A1+/AAA 3.60% 09/27/97 5,700,000 5,700,000
Sacramento County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 09/30/97 42,000,000 42,023,082
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.50% 10/28/97 8,000,000 8,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.30% 09/12/97 2,000,000 2,000,000
Sacramento Municipal Utility
District (LOC -- Bayerische
Landesbank)....................... P1/Aaa A1+/AAA 3.70% 10/17/97 4,293,000 4,293,000
San Bernardino County Industrial
Development Authority, NRI Inc.
Project (LOC -- California State)
(final maturity 5/1/09)*.......... NR/NR A1+/AA+ 3.25% 09/03/97 1,575,000 1,575,000
San Bernardino County Multi-Family
Housing, Brookside Meadows, Series
A (LOC -- Tokai Bank, Chase
Manhattan) (final maturity
8/1/05)*.......................... VMIG1/AA2 NR/NR 3.10% 09/03/97 13,000,000 13,000,000
San Bernardino County Tax & Revenue
Anticipation Notes, Series A...... MIG1/NR SP1+/NR 4.50% 06/30/98 7,000,000 7,036,240
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.65% 10/28/97 5,200,000 5,200,000
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.40% 09/09/97 5,000,000 5,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
66
<PAGE> 156
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric.................... P1/A1 A1/A+ 3.70% 11/21/97 $ 2,000,000 $ 2,000,000
San Diego City, Industrial
Development Authority, San Diego
Gas & Electric, Series A.......... P1/A1 A1/A+ 3.75% 11/13/97 1,500,000 1,500,000
San Diego County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.38% 09/30/97 24,100,000 24,111,147
San Diego County Water Authority... P1/NR A1/NR 3.40% 09/09/97 2,000,000 2,000,000
San Diego Housing Authority, Multi-
Family Housing, Nobel Ct.
Apartments, Series L (LOC --
Citibank, New York) (final
maturity 12/1/08)*................ VMIG1/AA2 NR/NR 3.05% 09/04/97 1,700,000 1,700,000
San Diego Housing Authority, Multi-
Family Housing, Nobel Ct.
Apartments, Series L (LOC -- Tokai
Bank, Ltd.) (final maturity
12/1/08)*......................... VMIG2/A2 NR/NR 3.05% 09/04/97 9,700,000 9,700,000
San Francisco City and County
Airport (LOC -- Bayerische
Landesbank)....................... P1/NR A1+/NR 3.65% 11/19/97 12,500,000 12,500,000
San Francisco City and County
Airport (LOC -- Bayerische
Landesbank)....................... P1/NR A1+/NR 3.65% 11/18/97 3,000,000 3,000,000
San Francisco City and County
Airport (FGIC Insured) (final
maturity 5/1/21)*................. A1+/AAA NR/NR 3.45% 09/04/97 5,345,000 5,345,000
San Francisco City and County
Airport (MBIA Insured) (final
maturity 5/1/26)*................. A1+/AAA NR/NR 3.40% 09/04/97 3,905,000 3,905,000
San Francisco City and County
Multi-Family Housing, Bayside
Village Project D, Series A
(LOC -- Industrial Bank of Japan)
(final maturity 12/1/05)*......... VMIG1/A2 NR/NR 3.45% 09/04/97 1,000,000 1,000,000
San Francisco City and County
Multi-Family Housing, Winterland
Project, Series 85-C (LOC --
Citibank, New York) (final
maturity 6/1/06)*................. NR/NR A1+/AA- 3.15% 09/02/97 1,500,000 1,500,000
San Francisco City and County Tax &
Revenue Anticipation Notes........ MIG1/NR SP1+/NR 4.50% 10/08/97 35,500,000 35,526,853
San Mateo County Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.50% 07/01/98 7,000,000 7,039,166
Simi Valley Multi-Family Housing,
Lincoln Wood Ranch (LOC --
Sumitomo Bank, Ltd.) (final
maturity 6/1/10)*................. NR/NR A1/A 3.35% 09/04/97 7,500,000 7,500,000
Southeast Recovery Facility, Series
B (AMT) (LOC -- Industrial Bank of
Japan Ltd.) (final maturity
12/1/18)*......................... VMIG1/A2 A1/A 3.20% 09/03/97 3,300,000 3,300,000
Southeast Recovery Facility, Series
A (LOC -- Industrial Bank of Japan
Ltd.) (final maturity 12/1/18)*... VMIG1/A2 A1/A 3.10% 09/03/97 22,000,000 22,000,000
Southern California Metropolitan
Water Authority................... P1/NR A1+/NR 3.60% 11/13/97 5,700,000 5,700,000
</TABLE>
- ---------------
See Notes to Financial Statements.
67
<PAGE> 157
<TABLE>
<CAPTION>
MOODY'S S&P AMORTIZED
RATINGS+ RATINGS+ MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ----------- ----------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Southern California Metropolitan
Water Authority................... P1/NR A1+/NR 3.55% 11/19/97 $ 4,000,000 $ 4,000,000
Tahoe-Truckee Unified School
District, Tax & Revenue
Anticipation Notes................ MIG1/NR SP1+/NR 4.45% 09/04/97 4,000,000 4,000,164
Tustin Improvement Board Act 1915,
Reassessment District 95-2-A
(LOC -- Kredietbank) (final
maturity 9/2/13)*................. VMIG1/AA2 A1+/AA- 3.40% 09/02/97 1,600,000 1,600,000
Vallejo Industrial Development
Authority, Meyer Cookware Project,
Series A (AMT) (LOC -- Bank of
Tokyo) (final maturity
12/1/23)*......................... NR/NR A1/A+ 3.40% 12/01/23 3,300,000 3,300,000
Washington Township Hospital,
Series A (LOC -- Industrial Bank
of Japan) (final maturity
1/1/16)*.......................... VMIG1/A2 NR/NR 3.20% 09/04/97 16,000,000 16,000,000
West Basin Water District,
Certificates of Participation,
Water Project (LOC -- Bayerische
Vereinsbank) (final maturity
8/1/27)*.......................... VMIG1/AA1 NR/NR 2.95% 09/03/97 3,000,000 3,000,000
--------------
1,152,029,909
--------------
PUERTO RICO -- 0.8%
Puerto Rico Public Buildings
Authority, Trust Receipts, Series
SGA16 (AMBAC Insured) (final
maturity 7/1/21)*................. NR/NR A1+/AAA 3.30% 09/03/97 9,380,000 9,380,000
--------------
TOTAL INVESTMENTS (AMORTIZED COST
$1,161,409,909)(A) -- 99.9%....... 1,161,409,909
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%............... 722,897
--------------
NET ASSETS -- 100.0%............... $1,162,132,806
==============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $1,162,132,806.
(a) Cost for federal income tax and financial reporting purposes is
substantially the same.
AMBAC -- AMBAC Indemnity Corporation.
AMT -- Interest on securities subject to Federal Alternative Minimum Tax.
FGIC -- Financial Guaranty Insurance Company.
FSA -- Financial Security Assurance.
LOC -- Letter of Credit.
MBIA -- Municipal Bond Insurance Association.
NR -- No rating assigned by Moody's or S&P.
* Variable rate security. Maturity date reflects the next rate change date.
+ The ratings provided consist of short-term and long-term ratings.
See Notes to Financial Statements.
68
<PAGE> 158
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY MARKET
FUND FUND
------------ --------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (amortized cost
$675,378,762, and $1,161,409,909, respectively)......... $675,378,762 $1,161,409,909
Interest Receivable....................................... 4,987,487 6,802,369
Receivable for investment securities sold................. 21,000,000 9,700,000
Receivable for capital shares sold........................ 5,411,487 9,219,947
Prepaid expenses.......................................... 48,551 38,659
Other assets.............................................. 1,612 13,911
------------ ------------
Total Assets............................................... 706,827,899 1,187,184,795
------------ ------------
LIABILITIES:
Payable to bank........................................... 1,756,798 192,929
Dividends payable......................................... 1,746,201 2,894,338
Payable for investment securities purchased............... 52,984,115 5,000,000
Payable for capital shares redeemed....................... 1,486,389 16,339,160
Investment advisory fees payable.......................... 55,123 101,023
Administration fees payable............................... 55,123 101,023
Special management fees payable (Pacific Horizon
Shares)................................................. 68,056 150,624
Shareholder service fees payable (Horizon Service
Shares)................................................. 43,461 114,766
Shareholder service fees payable (X Shares)............... -- 13,484
Shareholder service fees payable (S Shares)............... 781 6,414
12b-1 fees payable (X Shares)............................. -- 11,822
12b-1 fees payable (S Shares)............................. 2,549 22,089
Custodian and fund accounting fees payable................ 40,774 20,333
Transfer agent fees payable............................... 7,845 194
Legal fees payable........................................ 14,078 22,403
Other accrued expenses.................................... 7,603 45,012
Other liabilities......................................... 114,496 16,375
------------ ------------
Total Liabilities.......................................... 58,383,392 25,051,989
------------ ------------
NET ASSETS................................................. $648,444,507 $1,162,132,806
============ ============
Net Assets:
Pacific Horizon Shares.................................... $125,645,416 $ 552,976,956
Horizon Shares............................................ 314,659,354 --
Horizon Service Shares.................................... 201,920,043 530,276,082
X Shares.................................................. -- 42,026,222
S Shares.................................................. 6,219,694 36,853,546
------------ ------------
Total...................................................... $648,444,507 $1,162,132,806
============ ============
Shares Outstanding ($0.001 par value, 7.5 billion and 3
billion shares authorized):
Pacific Horizon Shares.................................... 125,673,075 552,990,812
Horizon Shares............................................ 314,809,976 --
Horizon Service Shares.................................... 201,952,032 530,313,144
X Shares.................................................. -- 42,027,842
S Shares.................................................. 6,219,699 36,853,653
------------ ------------
Total...................................................... 648,654,782 1,162,185,451
============ ============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE
PER SHARE................................................. $1.00 $1.00
===== =====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par............................ $ 648,655 $ 1,162,185
Additional paid-in capital................................ 647,969,431 1,160,959,805
Accumulated undistributed net investment income........... 52,442 62,301
Accumulated net realized losses on investment
transactions............................................ (226,021) (51,485)
------------ ------------
NET ASSETS, AUGUST 31, 1997................................ $648,444,507 $1,162,132,806
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
69
<PAGE> 159
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY MARKET
FUND FUND
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................. $10,669,668 $18,881,760
----------- -----------
EXPENSES:
Investment advisory fees............................. 287,597 525,653
Administration fees.................................. 287,597 525,653
Special management fees (Pacific Horizon Shares)..... 166,410 812,875
Shareholder service fees (Horizon Service Shares).... 230,549 624,698
Shareholder service fees (X Shares).................. -- 46,648
Shareholder service fees (S Shares).................. 895 7,728
12b-1 fees (X Shares)................................ -- 55,978
12b-1 fees (S Shares)................................ 2,686 23,185
Custodian and fund accounting fees................... 94,928 77,938
Transfer Agent fees.................................. 30,751 38,615
Legal fees........................................... 23,384 43,438
Other expenses....................................... 91,345 103,854
----------- -----------
Total Expenses..................................... 1,216,142 2,886,263
Less: Fee waivers.................................... (1,611) (13,911)
Expenses paid by third parties................. (6,862) (14,109)
----------- -----------
Total Net Expenses..................................... 1,207,669 2,858,243
----------- -----------
NET INVESTMENT INCOME.................................. 9,461,999 16,023,517
----------- -----------
NET REALIZED LOSSES ON INVESTMENTS:
Net realized losses on investment transactions....... (37,994) (40,625)
----------- -----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $ 9,424,005 $15,982,892
=========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
70
<PAGE> 160
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT
TAX-EXEMPT MONEY FUND MONEY MARKET FUND
----------------------------------- -----------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED
1997 FEBRUARY 28, 1997 FEBRUARY 28,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------ --------------- -------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income......... $ 9,461,999 $ 13,859,405 $ 16,023,517 $ 24,332,592
Net realized gains (losses) on
investment transactions..... (37,994) (26,740) (40,625) 26,388
---------------- ----------------- -------------- ---------------
Change in net assets resulting
from operations............. 9,424,005 13,832,665 15,982,892 24,358,980
---------------- ----------------- -------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Pacific Horizon Shares........ (1,619,004) (1,704,176) (7,695,663) (14,425,062)
Horizon Shares................ (4,896,550) (8,858,516) -- --
Horizon Service Shares........ (2,936,518) (3,296,713) (7,721,952) (9,708,150)
S Shares...................... (9,927)(c) -- (81,844)(b) --
X Shares...................... -- -- (524,058) (199,380)(a)
---------------- ----------------- -------------- ---------------
Change in net assets from
shareholder distributions..... (9,461,999) (13,859,405) (16,023,517) (24,332,592)
---------------- ----------------- -------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares Issued... 786,510,190 1,611,040,281 1,444,000,127 2,140,307,421
Dividends reinvested.......... 2,021,033 2,774,538 10,161,314 19,760,377
Cost of shares redeemed....... (659,582,299) (1,481,260,268) (1,285,710,000) (1,897,767,756)
---------------- ----------------- -------------- ---------------
Change in net assets from
capital share transactions.... 128,948,924 132,554,551 168,451,441 262,300,042
---------------- ----------------- -------------- ---------------
Change in net assets........... 128,910,930 132,527,811 168,410,816 262,326,430
NET ASSETS
Beginning of Period........... 519,533,577 387,005,766 993,721,990 731,395,560
---------------- ----------------- -------------- ---------------
End of Period................. $648,444,507 $ 519,533,577 $1,162,132,806 $ 993,721,990
================ ================= ============== ===============
</TABLE>
- ---------------
(a) Period from October 2, 1996 (inception date) to February 28, 1997.
(b) Period from June 18, 1997 (inception date) to August 31, 1997.
(c) Period from July 8, 1997 (inception date) to August 31, 1997.
See Notes to Financial Statements.
71
<PAGE> 161
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen portfolios. The accompanying
financial statements and notes are those of the Pacific Horizon Tax-Exempt Money
Fund (the "Tax-Exempt Fund") and Pacific Horizon California Tax-Exempt Money
Market Fund (the "California Tax-Exempt Fund"), collectively the "Funds",
individually the "Fund".
The Tax-Exempt Fund issues four classes of shares (Pacific Horizon Shares,
Horizon Shares, Horizon Service Shares and effective July 8, 1997, S Shares) and
California Tax-Exempt Fund issues four classes of shares (Pacific Horizon
Shares, Horizon Service Shares, and effective October 2, 1996, X Shares and
effective June 18, 1997, S Shares). The California Tax-Exempt Fund is authorized
to issue a fifth class of shares (Horizon Shares). Pacific Horizon Shares have a
Special Management Services Agreement/Plan while the Horizon Service Shares have
a Shareholder Services Plan. X Shares and S Shares have a Distribution and
Services Plan.
The Funds' seek to provide as high a level of current interest income exempt
from federal income taxes as is consistent with relative stability of principal
and daily liquidity. In addition, the California Tax-Exempt Fund seeks to
provide income that is also exempt from California state income taxes.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund, through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
72
<PAGE> 162
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The securities of the Funds 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 principal amount due at maturity and initial
cost. In addition, the portfolios 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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses from security transactions are recorded on an
identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses (other than class specific expenses) and
realized and unrealized gains and losses on investments of a fund are allocated
to each class of shares based upon their relative net asset value on the date
income
73
<PAGE> 163
is earned or expenses and realized and unrealized gains and losses are incurred.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income is declared as a dividend daily, and paid
monthly, to shareholders of record at the close of business on record date. Net
realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains of the Funds can be
offset by capital loss carryovers of the Funds, such gains will not be
distributed. Dividends and distributions are recorded by the Funds on the
ex-dividend date.
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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET GAIN/(LOSS)
INVESTMENT ON
INCOME INVESTMENTS
------------- ------------
<S> <C> <C>
Tax-Exempt Fund $52,442 $(15,746)
California Tax-
Exempt Fund -- (659)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely all of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the Tax-Exempt Fund and California Tax-Exempt Fund had
the following capital loss carryovers:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
FUND CARRYOVER DATE
- ------------------------- ------------ -----------
<S> <C> <C>
Tax-Exempt Fund $ 16,664 1998
14,011 2000
71,218 2002
19,132 2003
36,425 2004
30,577 2005
-------
$188,027
=======
California Tax-Exempt
Fund $ 4,266 2004
=======
</TABLE>
To the extent that these loss carryovers are used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders. During the year ended February 28, 1997, the California Tax-Exempt
Fund utilized $32,982 of its available capital loss carryover to offset realized
capital gains for federal income tax purposes,
74
<PAGE> 164
while $35,348 of capital loss carryovers expired for the Tax-Exempt Fund.
Capital losses incurred after October 31 for the California Tax-Exempt Fund
are deemed to arise on the first business day of the following fiscal year for
tax purposes. The Fund has incurred and elected to defer capital losses of
$6,594 after October 31, 1996.
OTHER:
The Funds maintain a cash balance with its custodian and receives a
reduction of its custody fees and expenses for the amount of interest earned on
such uninvested cash balances. For financial reporting purposes for the six
months ended August 31, 1997, custodian fees and expenses paid by third parties
were increased by $6,862 and $14,109 for the Tax-Exempt Fund and California Tax-
Exempt Fund. There was no effect on net investment income. The Fund could have
invested such cash amounts in income producing assets if it had not agreed to a
reduction of fees or expenses under the expense offset arrangement with its
custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America. For
the six months ended August 31, 1997, the Funds had an Administration Agreement
with BISYS and a Distribution Agreement with the Distributor. Bank of America is
entitled to a fee from each Fund, which is accrued daily and payable monthly, at
an annual rate of 0.10% of each Fund's first $3 billion of net assets, plus
0.09% of each Fund's next $2 billion of net assets, plus 0.08% of each Fund's
net assets in excess of $5 billion. BISYS is entitled to a fee from each Fund
which is accrued daily and payable monthly, at an annual rate of 0.10% of each
Fund's first $7 billion of net assets, plus 0.09% of each Fund's next $3 billion
of net assets, plus 0.08% of each Fund's net assets in excess of $10 billion.
The Funds have entered into a Special Management Services Agreement (the
"Services Agreement") pursuant to which they agree to pay Bank of America and
BISYS 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% and 0.35%
for the Tax-Exempt Money Fund and California Tax-Exempt Fund, respectively, of
the average daily net assets of the outstanding Pacific Horizon Shares of each
Fund. Fees under the Services Agreement are borne solely by the Pacific Horizon
Shares.
Effective January 1997, the Services Agreement was terminated. The Funds
have adopted a Special Management Services Plan (the "Services Plan") pursuant
to which Service Organizations agree to provide certain services to their
clients who are beneficial owners of Pacific Horizon Shares in return for a
payment by the Funds of a fee at an annual rate of 0.32% and 0.35% for the
Tax-Exempt Money Fund and California Tax-Exempt Fund, respectively, of the
average daily net assets of the outstanding Pacific Horizon Shares of each Fund.
Currently, the California Tax-Exempt Fund is waiving 0.03% in special management
fees. Fees under the Services Plan are borne solely by the Pacific Horizon
Shares. Service Organiza-
75
<PAGE> 165
tions may include Bank of America, BISYS and its affiliates. For the six months
ended August 31, 1997, the Funds were advised that Bank of America and its
affiliates and BISYS earned the following amounts pursuant to the Services
Agreement and Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES BISYS
- ------------------------- ----------- ------
<S> <C> <C>
Tax-Exempt Fund $ 162,947 $2,939
California Tax-Exempt
Fund 807,230 5,548
</TABLE>
The Funds have also adopted a Shareholder Services Plan (the "Horizon
Services 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 Funds of a fee at an annual rate of 0.25% of the
average daily net assets of the Horizon Service Shares. Fees under the Horizon
Services Plan are borne solely by the Horizon Service Shares. Service
Organizations may include the Distributor, Bank of America and its affiliates.
For the six months ended August 31, 1997, the Funds were advised that Bank of
America and its affiliates earned the following amounts pursuant to the Horizon
Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
Tax-Exempt Fund $ 189,273
California Tax-Exempt Fund 512,823
</TABLE>
The California Tax-Exempt Fund has adopted the Distribution and Services
Plan under which the Funds pay 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 such Fund's X Shares. For the six months ended August 31, 1997 the
Funds were advised that Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
California Tax-Exempt Fund $46,481
</TABLE>
The Funds have adopted the Distribution and Services Plan under which the
Fund pays the Distributor and Service Organization for the provision of support
services with respect to the beneficial owners of S shares. Payments for the
distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%, respectively, of the average daily net assets of
the Funds' S shares. For the period from July 8, 1997(date of inception) to
August 31, 1997 the Fund was advised that Bank of America and its affiliates
earned the following amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA AND
FUND AFFILIATES
- ----------------------------------- -----------
<S> <C>
Tax-Exempt Fund $ 895
California Tax-Exempt Fund $ 7,718
</TABLE>
Prior to February 28, 1997, BankAmerica Corporation obtained a letter of
credit issued by a third-party financial institution which guaranteed the
payment of principal and interest of a security issued by Orange County
California that was held by the California Tax-Exempt Fund. This letter of
credit enabled the security, together with the letter of credit, to be valued at
par. BankAmerica Corporation agreed to reimburse the
76
<PAGE> 166
third-party financial institution to the extent any portion of this letter of
credit is drawn down. During the year ended February 28, 1997, this letter of
credit expired. The Orange County California Securities previously held by the
California Tax-Exempt Fund were substituted with a new issue from Orange County,
which does not require such letter of credit.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities for the Funds, BISYS Ohio earned $30,751 and $38,615 from
the Tax-Exempt Fund and California Tax-Exempt Fund, respectively, for the six
months ended August 31, 1997.
For the six months ended August 31, 1997, the Tax-Exempt Fund and California
Tax-Exempt Fund incurred legal charges totaling $23,384 and $43,438
respectively, which were earned by a law firm, a partner of which serves as
Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company 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 pursuant to the Retirement Plan
amounted to $2,471 and $1,987 for the Tax-Exempt Fund and California Tax-Exempt
Fund respectively, for the six months ended August 31, 1997.
77
<PAGE> 167
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Tax-Exempt Fund invests substantially all of its assets in a diversified
portfolio of tax-exempt debt obligations. The California Tax-Exempt Fund invests
substantially all of its assets in a nondiversified portfolio of tax-exempt debt
obligations primarily consisting of issuers in the State of California. The
issuers' abilities to meet their obligations may be affected by economic,
regional or political developments.
The Tax-Exempt Fund and the California Tax-Exempt Fund had the following
concentrations by industry sector at August 31, 1997 (as a percentage of total
investments):
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
FUND FUND
---------- ----------
<S> <C> <C>
Airport Facilities 1.5% 0.8%
Commercial Paper 16.4 22.0
Education 6.4 1.3
General Obligations 11.7 5.8
Healthcare 19.0 7.9
Housing Developments 7.1 14.5
Industrial Development
Revenue 5.2 3.6
Leases 1.5 3.6
Miscellaneous 2.8 0.3
Pollution Control 7.1 8.6
Power Projects 2.5 --
Revenue 10.7 17.9
Sewer Projects -- 4.5
Special Tax -- 0.4
Solid Waste 0.6 --
Transportation 3.0 5.1
Utilities 2.1 2.0
Waste Management 1.4 --
Water Projects 1.0 1.7
------ ------
100.0% 100.0%
====== ======
</TABLE>
78
<PAGE> 168
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of each Portfolio (at $1.00 per share) for the
periods indicated are summarized below:
<TABLE>
<CAPTION>
TAX-EXEMPT CALIFORNIA TAX-EXEMPT
MONEY FUND MONEY MARKET FUND
------------------------------------- -------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997 AUGUST 31, 1997 FEBRUARY 28, 1997
---------------- ----------------- ---------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Pacific Horizon Shares
Issued................. 107,335,976 230,496,897 472,684,566 917,590,384
Reinvested............. 1,286,411 1,545,273 6,297,080 13,790,272
Redeemed............... (69,393,203) (195,234,875) (419,052,410) (966,354,368)
------------ ------------ ------------ ------------
Net
increase/(Decrease).... 39,229,184 36,807,295 59,929,236 (34,973,712)
============ ============ ============ ============
Horizon Shares
Issued................. 423,971,615 997,203,792 -- --
Reinvested............. 25,652 135,161 -- --
Redeemed............... (373,441,909) (1,035,902,063) -- --
------------ ------------ ------------ ------------
Net increase/
(Decrease)........... 50,555,358 (38,563,110) -- --
============ ============ ============ ============
Horizon Service Shares
Issued................. 248,702,939 383,339,592 877,065,089 1,184,396,760
Reinvested............. 655,199 1,094,104 3,431,872 5,770,710
Redeemed............... (216,413,455) (250,123,330) (821,759,112) (921,990,855)
------------ ------------ ------------ ------------
Net increase............ 32,944,683 134,310,366 58,737,849 268,176,615
============ ============ ============ ============
X Shares
Issued................. -- -- 45,086,213 38,320,277
Reinvested............. -- -- 420,087 199,395
Redeemed............... -- -- (32,575,597) (9,422,533)
------------ ------------ ------------ ------------
Net increase............ -- -- 12,930,703 29,097,139(a)
============ ============ ============ ============
S Shares
Issued................. 6,552,102 -- 49,164,259 --
Reinvested............. 1,329 -- 12,275 --
Redeemed............... (333,732) -- (12,322,881) --
------------ ------------ ------------ ------------
Net increase............ 6,219,699(c) -- 36,853,653(b) --
============ ============ ============ ============
</TABLE>
- ---------------
(a) Period from October 2, 1996 (inception date) to February 28, 1997.
(b) Period from June 18, 1997 (inception date) to August 31, 1997.
(c) Period from July 8, 1997 (inception date) to August 31, 1997.
79
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PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD
AUGUST 31, ------------------------------------------ ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994(a)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0157 0.0290 0.0327 0.0253 0.0124
Less dividends to shareholders from
net investment income............. (0.0157) (0.0290) (0.0327) (0.0253) (0.0124)
------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- -- -- -- --
------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
======= ======= ======= ======= =======
Total return....................... 1.58%(d) 2.94% 3.32% 2.56% 1.25%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 126 $ 86 $ 50 $ 37 $50
Ratio of expenses to average net
assets.......................... 0.60%(c) 0.60% 0.63% 0.60% 0.60%(c)
Ratio of net investment income to
average net assets.............. 3.12%(c) 2.91% 3.26% 2.47% 1.95%(c)
Ratio of expenses to average net
assets*......................... (e) (b) (b) (b) 0.61%(c)
Ratio of net investment income to
average net assets*............. (e) (b) (b) (b) 1.94%(c)
</TABLE>
- ---------------
* 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.
(a) Period from July 9, 1993 (inception date) to February 28, 1994.
(b) There were no fee waivers or expense reimbursements during the period.
(c) Annualized.
(d) Not Annualized.
(e) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
80
<PAGE> 170
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income....... 0.0173 0.0322 0.0359 0.0285 0.0225 0.0269
Less dividends to
shareholders from net
investment income........... (0.0173) (0.0322) (0.0359) (0.0285) (0.0225) (0.0269)
-------- -------- -------- -------- -------- --------
Net change in net asset value
per share................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return................. 1.75%(c) 3.27% 3.65% 2.89% 2.27% 2.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................ $ 315 $ 264 $ 303 $ 382 $ 515 $ 384
Ratio of expenses to average
net assets................ 0.28%(b) 0.28% 0.31% 0.28% 0.28% 0.28%
Ratio of net investment
income to average net
assets.................... 3.42%(b) 3.22% 3.58% 2.81% 2.25% 2.69%
Ratio of expenses to average
net assets*............... (d) (a) (a) (a) 0.29% (a)
Ratio of net investment
income to average net
assets*................... (d) (a) (a) (a) 2.24% (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Annualized.
(c) Not annualized.
(d) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
81
<PAGE> 171
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income.... 0.0161 0.0297 0.0334 0.0260 0.0200 0.0244
Less dividends to
shareholders from net
investment income........ (0.0161) (0.0297) (0.0334) (0.0260) (0.0200) (0.0244)
-------- ------- ------- ------- ------- -------
Net change in net asset
value per share.......... -- -- -- -- -- --
-------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE,
END OF PERIOD............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= =======
Total return.............. 1.62%(c) 3.01% 3.39% 2.63% 2.02% 2.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period (millions)...... $ 202 $ 169 $ 35 $ 39 $ 48 $ 50
Ratio of expenses to
average net assets..... 0.53%(b) 0.53% 0.56% 0.53% 0.53% 0.53%
Ratio of net investment
income to average net
assets................. 3.19%(b) 2.98% 3.34% 2.57% 2.04% 2.42%
Ratio of expenses to
average net assets*.... (d) (a) (a) (a) 0.57% (a)
Ratio of net investment
income to average net
assets*................ (d) (a) (a) (a) 2.00% (a)
</TABLE>
- ---------------
* 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.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Annualized.
(c) Not annualized.
(d) Fees paid by third parties had no effect on the ratios.
See Notes to Financial Statements.
82
<PAGE> 172
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD......... $ 1.00
Income from Investment Operations:
Net investment income................................ 0.0042
Less dividends to shareholders from net investment
income............................................... (0.0042)
--------
Net change in net asset value per share................ --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD............... $ 1.00
========
Total return........................................... 1.55%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............... $ 6
Ratio of expenses to average net assets.............. 0.83%(c)
Ratio of net investment income to average net
assets............................................. 2.77%(c)
Ratio of expenses to average net assets*............. (b)
Ratio of net investment income to average net
assets*............................................ (b)
</TABLE>
- ---------------
* 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.
(a) Period from July 8, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
83
<PAGE> 173
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ----------------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income....... 0.0153 0.0284 0.0324 0.0249 0.0186 0.0224
Net realized gains/(losses)
on investment
transactions.............. -- -- (0.0001) (0.0001) 0.0002 (0.0002)
-------- -------- -------- -------- -------- --------
Total income from investment
operations.................. 0.0153 0.0284 0.0323 0.0248 0.0188 0.0222
Less dividends to
shareholders from net
investment income........... (0.0153) (0.0284) (0.0324) (0.0249) (0.0186) (0.0224)
-------- -------- -------- -------- -------- --------
Net change in net asset value
per share................... -- -- (0.0001) (0.0001) 0.0002 (0.0002)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE,
END OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return................. 1.54%(d) 2.88% 3.29% 2.52% 1.88% 2.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................ $ 553 $ 493 $ 528 $ 187 $ 204 $ 128
Ratio of expenses to average
net assets................ 0.57%(c) 0.57% 0.62% 0.62% 0.66% 0.66%
Ratio of net investment
income to average net
assets.................... 3.03%(c) 2.83% 3.35% 2.48% 1.86% 2.21%
Ratio of expenses to average
net assets*............... (b) 0.60%** 0.63%** (a) 0.68% 0.74%
Ratio of net investment
income to average net
assets*................... (b) 2.80% (b) (a) 1.84% 2.13%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the
Portfolio received credits from its custodian for interest earned on
uninvested cash balances which were used to offset custodian fees and
expenses. If such credits had not occurred, the expense ratio would have
been as indicated. The ratio of net investment income was not affected.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
84
<PAGE> 174
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................... 0.0157 0.0291 0.0331 0.0256 0.0198
Net realized gains/(losses) on investment
transactions........................... -- -- 0.0001 (0.0001) (0.0001)
-------- -------- -------- -------- --------
Total income from investment operations... 0.0157 0.0291 0.0332 0.0255 0.0197
Less dividends to shareholders from net
investment income........................ (0.0157) (0.0291) (0.0331) (0.0256) (0.0198)
-------- -------- -------- -------- --------
Net change in net asset value per share... -- -- 0.0001 (0.0001) (0.0001)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return.............................. 1.58%(d) 2.95% 3.36% 2.59% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)... $ 530 $ 472 $ 203 $ 88 $ 124
Ratio of expenses to average net
assets................................. 0.50%(c) 0.50% 0.55% 0.55% 0.53%
Ratio of net investment income to average
net assets............................. 3.09%(c) 2.92% 3.43% 2.50% 1.98%
Ratio of expenses to average net
assets*................................ (b) (b) 0.55%** (a) 0.60%
Ratio of net investment income to average
net assets*............................ (b) (b) 3.42% (a) 1.91%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the year ended February 29, 1996 the Portfolio received credits from
its custodian for interest earned on uninvested cash balances which were
used to offset custodian fees and expenses. If such credits had not
occurred, the expense ratio would have been as indicated. The ratio of net
investment income was not affected.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
85
<PAGE> 175
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
AUGUST
31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (A)
--------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
PERIOD................................ $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income................. 0.0142 0.0107
Less dividends to shareholders from net
investment income..................... (0.0142) (0.0107)
-------- --------
Net change in net asset value per
share................................. -- --
-------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD................................ $ 1.00 $ 1.00
======== ========
Total return............................ 1.85% (d) 1.09%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions).......................... $ 42 $ 29
Ratio of expenses to average net
assets.............................. 0.80% (c) 0.80%(c)
Ratio of net investment income to
average net assets.................. 2.81% (c) 2.66%(c)
Ratio of expenses to average net
assets*............................. (b ) (b)
Ratio of net investment income to
average net assets*................. (b ) (b)
</TABLE>
- ---------------
* 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.
(a) Period from October 2, 1996 (inception date) to February 29, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
86
<PAGE> 176
PACIFIC HORIZON
CALIFORNIA TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31, 1997
(UNAUDITED)(A)
----------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0057
Less dividends to shareholders from net investment
income................................................. (0.0057)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 1.85%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 37
Ratio of expenses to average net assets................ 0.80%(c)
Ratio of net investment income to average net assets... 2.65%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* 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.
(a) Period from June 18, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
87
<PAGE> 177
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
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