<PAGE> 1
HORIZON TAX-EXEMPT MONEY MARKETS FOR INSTITUTIONS
HORIZON SHARES AND HORIZON SERVICE SHARES
OF THE
TAX-EXEMPT MONEY FUND
HORIZON SERVICE SHARES OF THE
CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
ANNUAL REPORT
February 28, 1997
[PACIFIC HORIZON FUND LOGO]
NOT FDIC INSURED
Concord Financial Group, Inc., Distributor
<PAGE> 2
PACIFIC HORIZON FUNDS, INC.
3435 Stelzer Road, Columbus, OH 43219
1-800-426-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
The BISYS Group, Inc.
3435 Stelzer Road
Columbus, OH 43219
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Concord Financial Group, Inc.
3435 Stelzer Road
Columbus, OH 43219
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Concord
Financial Group, 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.
There can be no assurance that the Funds will be able to maintain a Net Asset
Value (NAV) of $1.00 per share and Fund shares are not insured or guaranteed by
the U.S. Government or its agencies.
For certain investors, a portion of the income earned on municipal bond funds
may be subject to the federal Alternative Minimum Tax (AMT), and to state and
local taxes.
This material must be preceded or accompanied by a current prospectus.
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.
<PAGE> 3
Contents
<TABLE>
<S> <C>
ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER 2-3
FUND OVERVIEW AND
INTERVIEW WITH YOUR
INVESTMENT MANAGER 4-5
PORTFOLIOS OF INVESTMENTS 6-29
STATEMENTS OF ASSETS
AND LIABILITIES 30
STATEMENTS OF OPERATIONS 31
STATEMENTS OF CHANGES
IN NET ASSETS 32
NOTES TO FINANCIAL
STATEMENTS 33-40
FINANCIAL HIGHLIGHTS 41-46
REPORT OF INDEPENDENT
ACCOUNTANTS 47
</TABLE>
<PAGE> 4
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISER
The Standard & Poor's Stock Index posted a total return of 26.18% during the 12
month period ended February 28, 1997, amply rewarding long-term investors who
rode out volatility early in the period.* The best performers were concentrated
among shares of large company stocks, which significantly outpaced shares of
smaller firms.
At the end of this period, however, the markets began to give serious
consideration to a possible tightening of monetary policy following Federal
Reserve Chairman Alan Greenspan's Humphrey-Hawkins testimony. Chairman
Greenspan's comments focused on current high levels of consumer confidence and
the potential for inflationary pressures to surface. His comments fueled renewed
volatility in the fixed-income markets, and the bellwether 30-year Treasury bond
ended the period with a 0.36% total return.**
THE CASE FOR
STOCKS AND BONDS
The stock market's gain raises some important issues. Late in the period, there
was considerable discussion concerning Federal Reserve Chairman Alan Greenspan's
comments of "irrational exuberance" in his reflections on the state of the U.S.
equity markets. Other observers felt that investors should be optimistic based
on the healthy business climate in the U.S., the moderate economic policies of
the current administration and the focus in Washington on balanced budgets.
Overall, the U.S. economy seems poised for continued moderate growth, which is
good news for stocks. The stock market's current price-to-earnings (P/E) ratio
of 17.8 times our 1997 earnings estimates is within the 16 to 19 times range of
the 1960s when we had similar inflation levels. We think it is reasonable to
expect P/E ratios to stay at current levels. That gives an estimated market
return over the next 12 months of 10% (8% from earnings growth and 2% from
dividend yield).
Congress and the Clinton Administration continue to entertain the prospect of a
Balanced Budget Amendment, mandating the end of federal deficits within five to
seven years. While an agreement has not passed to date, this shift in attitude
bodes well for both stocks and bonds, as a balanced budget facilitates lower
interest rates, encouraging earnings growth.
POTENTIAL RISKS
Given the length of the current economic expansion, history tells us that the
bulls will run out of steam. Slowing economic growth is a double-edged sword as
lower corporate earnings lead to both a decline in prices and a reallocation of
savings. Companies with disappointing earnings may quickly fall into disfavor.
Broad equity indices may then decline as investors reallocate their assets into
more stable stocks.
The U.S. bond market and, indirectly, the U.S. equity market have benefited from
strong purchases of U.S. Treasuries by foreign investors. Supported by an
appreciating dollar, foreign purchases of U.S. Treasuries in 1996 were $265
billion compared to $118 billion in net sales by domestic investors (for four
quarters ended December 31, 1996).*** If the dollar should decline, there would
be less incentive to buy dollar denominated assets.
LOOKING FORWARD
In our view, investors should approach the remainder of 1997 with rational
exuberance tempered by a knowledge of history. Under the best case scenario, the
U.S. economy will see a move toward sustainable growth, higher real interest
rates and an anticipated 8% to 9% increase in corporate profits. Given these
projections, most investment professionals expect equities to perform well in
1997, although below 1996 levels. Bonds at this juncture seem attractive,
especially given the recommended revisions to real rates of inflation and the
trend toward a balanced federal budget.
2
<PAGE> 5
History, however, usually repeats itself, and we would not be surprised to see
some corrections ahead. Thus, investors may want 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 Hartman
Kirk Hartman
Chief Investment Officer,
Bank of America NT&SA,
Investment Adviser to the
Pacific Horizon Funds
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole, and cannot be invested in directly.
** Source: Bloomberg using Merrill Lynch Taxable Bond Indices which reflects
the 30-year Treasury bond return.
*** Source: ISI Group
3
<PAGE> 6
PACIFIC HORIZON
TAX-EXEMPT MONEY MARKET FUNDS
[KIMBERLEE WILT PICTURE]
KIMBERLEE WILT
Portfolio Manager
Tax-Exempt Money Market Funds
Bank of America NT&SA
GOAL:
The Pacific Horizon Tax-Exempt Money Fund seeks 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 Money Market Fund seeks to provide income that is also exempt from
California state income taxes.+
INVESTMENTS:
The Funds invest primarily in short-term municipal securities with maturities of
thirteen months or less.
APPROPRIATE FOR:
Investors seeking monthly tax-exempt interest income along with daily liquidity.
SIZE OF FUNDS AS OF
FEBRUARY 28, 1997:
Tax-Exempt Money Fund:
Over $519 million
California Tax-Exempt Money Market
Fund: Over $993 million
- ---------------
+ Certain investors may be subject to the federal Alternative Minimum Tax (AMT)
and to certain state and local taxes.
TAX-EXEMPT MONEY FUND
CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
Q WHAT FACTORS AFFECTED THE ECONOMY AND INTEREST RATES DURING THE 12 MONTHS
ENDED FEBRUARY 28, 1997?
A On January 31, 1996, the Federal Reserve lowered the Federal Funds Rate .25%
to 5.25%. However, by mid-February the data had turned to reflect an underlying
strength in the economy. The year was characterized by moderate to strong
growth, little or no inflationary pressures, a strong dollar, and strong foreign
demand coupled with weak foreign growth.
Q WHAT OTHER FACTORS AFFECTED THE TAX-EXEMPT MONEY MARKETS?
A Growth in municipal money market funds has surpassed any other class of
municipal mutual funds. The assets have increased by more than 10%.* The growth
in assets has increased demand while supply has slightly declined. The net
affect of these two factors has been a slight downward pressure on yields.
Q HOW DID YOU MANAGE THE FUNDS IN THAT ENVIRONMENT?
A We attempted to anticipate supply and demand imbalances and adjusted our
strategies accordingly. In general, if we anticipate excess demand, we attempt
to buy securities for forward settlement. If we anticipate excess supply, we
increase our percentage holdings of short variable rate demand notes, which
permits the increased yields to be captured more quickly.
Q HOW DID YOU STRUCTURE THE FUNDS' PORTFOLIOS DURING THE RECENT 12 MONTHS?
A Depending on our current view of the yield curve and the technical factors
4
<PAGE> 7
which underlie supply and demand, we utilized all three of the broad strategies
throughout the year. If we anticipated a steepening of the yield curve, we
positioned the Funds in a bullet. With this strategy, the aggregate of the
portfolio comes due within approximately the same time frame. When we expected a
flattening of the yield curve, we used a barbell structure, which combined
investments in overnight securities and longer-term issues that mature in 11 to
13 months. When we were neutral, we picked a laddered strategy, investing in
securities with a series of different maturities.
Q WHAT WAS THE RANGE OF THE PORTFOLIOS' AVERAGE MATURITIES DURING THE RECENT
PERIOD?
A For fiscal 1997, the weighted average maturity of the Funds ranged from 26
to 63 days.** The variance is typical of tax-exempt funds, since approximately
90% of one-year notes mature in June. Consequently, average maturities of the
Funds are high in July and August as we accumulate notes, and tend to be lowest
in June when the notes mature.
Q WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND INTEREST RATES IN THE COMING YEAR?
A We are cautiously optimistic. We anticipate increased volatility in the
near-term, coupled with a gradual ascent in rates and a somewhat flatter yield
curve. We continue to forecast that the Federal Reserve will tighten the Federal
Funds rate by .50% this year, bringing the Federal Funds rate to 5.75%.***
Currently, the market has already priced a .25% tightening, which is reflected
in the two-year Treasury note yielding 6.13%.
- ------------
* Source: ICI, 1997
** The composition of the Funds' holdings is subject to change.
*** Note: This move occurred in late March 1997, subsequent to the close of the
Fund year.
CURRENT SEVEN-DAY YIELDS
AS OF FEBRUARY 28, 1997+
- ---------------------------------------
<TABLE>
<CAPTION>
HORIZON
HORIZON SERVICE
SHARES SHARES
- ---------------------------------------------
<S> <C> <C>
Tax-Exempt Money Fund 3.19% 2.94%
..............................................
California Tax-Exempt
Money Market Fund -- 2.92%
..............................................
- ---------------------------------------------
</TABLE>
- ------------
Horizon and Horizon Service shares are classes of shares within the same
portfolio.
+ Past performance is no guarantee of future results. Yields will fluctuate with
the market. The Funds' income may be subject to certain state and local taxes
and, depending on your tax status, the federal Alternative Minimum Tax (AMT).
Investments in money market funds are neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that the Funds will be able to
maintain a stable Net Asset Value (NAV) of $1.00 per share.
5
<PAGE> 8
? DRAFT OF: APRIL 21, 1997
THE INFORMATION CONTAINED
IN THIS DOCUMENT IS
------------------------------------------------------------------
CONFIDENTIAL
------------------------------------------------------------------
To enable our composition staff to serve you better,
please consider the following suggestions:
- Write Legibly
- Specify blacklining requirements with each round of changes
- Use Current proofs to mark new changes
- Allow 1/8" from edge of page if FAXing
- Avoid using felt-tipped pens or soft lead pencils, black ball point
pens are best
- Place X in Margin by small changes
<TABLE>
<C> <C> <S>
SEE ? ABOVE FOR MARKING (BLACKLINING)
</TABLE>
*** EDGAR ALERT ***
As of May 6th, 1996, ALL domestic filings with the Securities and Exchange
Commission MUST
be submitted via the E.D.G.A.R. system. Careful planning -- especially
concerning fees,
exhibits and ancillary documents -- will greatly facilitate this procedure.
Please contact your
Bowne representative for suggestions on how we might better work together.
(LOGO)
[ ] Bowne of Cleveland (216) 621-8384 FAX (216) 621-1132
[ ] Bowne of Columbus (614) 221-8384 FAX (614) 221-8427
[ ] Bowne of Cincinnati (513) 621-8384 FAX (513) 621-2901
[ ] Bowne of Pittsburgh (412) 281-3838 FAX (412) 281-4546
<PAGE> 9
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
February 28, 1997
- --------------------------------------------------------------------------------
<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 -- 99.6%
ARIZONA -- 4.9%
Apache County
Industrial
Development, Tuscon
Electric Power, Series
A (LOC -- Chase
Manhattan) (Final
maturity 6/15/20)*.... VMIG1/Aa2 A1/A+ 3.30% 3/5/97 $ 17,200,000 $ 17,200,000
Apache County
Industrial
Development, Tucson
Electric Power, Series
83-A (LOC -- Barclays
Bank) (Final maturity
12/15/18)*............ VMIG1/Aa2 A1+/AA 3.30% 3/5/97 7,400,000 7,400,000
Pima County Industrial
Development, Tucson
Electric Power, Series
A (LOC -- Barclays
Bank, New York) (Final
maturity 3/15/18)*.... VMIG1/Aa2 A1+/AA 3.30% 3/5/97 1,000,000 1,000,000
------------
25,600,000
------------
CALIFORNIA -- 4.2%
California Revenue
Anticipation Notes,
Series A.............. MIG1/NR Sp1+/NR 4.50% 6/30/97 5,000,000 5,008,448
Los Angeles County
Public Works, Series A
(MBIA Insured)........ NR/Aaa NR/AAA 4.50% 9/1/97 4,600,000 4,613,915
Newport Beach, Hoag
Memorial Presbyterian
Hospital, (Final
maturity 10/1/22)*.... VMIG1/A1 A1+/AA 3.35% 3/3/97 3,300,000 3,300,000
Orange County
Sanitation Districts,
Certificates of
Participation, Series
C, (FGIC Insured)
(Final maturity
8/1/17)*.............. VMIG1/Aaa A1+/AAA 3.40% 3/3/97 5,000,000 5,000,000
Rocklin Unified School
District (FGIC
Insured).............. NR/NR Sp1+/NR 4.45% 9/4/97 3,700,000 3,709,466
------------
21,631,829
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
6
<PAGE> 10
<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 -- 2.1%
Colorado Health
Facilities, Sisters of
Charity Health (Final
maturity 5/15/25)*.... VMIG1/Aa2 A1+/AA 3.30% 3/6/97 $ 4,600,000 $ 4,600,000
Colorado State Tax &
Revenue Anticipation
Notes, Series A....... NR/NR Sp1+/NR 4.50% 6/27/97 5,000,000 5,010,117
Pitkin County
Industrial
Development, Aspen
Skiing Co. Project,
Series A (LOC -- First
National Bank,
Chicago) (Final
maturity 4/1/16)*..... NR/NR A1+/AA- 3.45% 3/3/97 1,300,000 1,300,000
------------
10,910,117
------------
DISTRICT OF COLUMBIA -- 2.0%
District of Columbia,
Series A-3 (LOC --
Toronto Dominion Bank)
(Final maturity
10/1/07)*............. VMIG1/Aa2 A1+/AA 3.55% 3/3/97 8,300,000 8,300,000
District of Columbia,
Series A-6 (LOC --
National Westminster)
(Final maturity
10/1/07)*............. VMIG1/Aa2 A1+/AA 3.55% 3/3/97 2,000,000 2,000,000
------------
10,300,000
------------
FLORIDA -- 13.0%
Florida Board of
Education (Final
maturity 6/1/23)*..... NR/Aa A1+/AA 3.60% 6/1/97 9,900,000 9,900,000
Jacksonville Power &
Light................. P1/A1 A1+/AA- 3.50% 7/16/97 3,000,000 3,000,000
Jacksonville Electric
Authority, Series
D-3................... NR/NR A1+/NR 3.55% 5/22/97 5,000,000 5,000,000
Jacksonville Hospital
Revenue, Baptist
Medical Center Project
(LOC -- First Union
National Inc.) (Final
maturity 6/1/09)*..... MIG1/NR A1/A+ 3.35% 3/6/97 7,500,000 7,500,000
Lee County Housing
Authority, Forestwood
Apartments Project,
Series A (Final
maturity 6/15/25)*.... NR/NR A1+/AAA 3.35% 3/5/97 3,300,000 3,300,000
Miami Health
Facilities, Cedars
Medical Center, Series
A, Prerefunded @ 102
(Final maturity
10/1/17).............. NR/NR NR/NR 8.38% 10/1/97 1,000,000 1,040,588
</TABLE>
- ---------------
See Notes to Financial Statements.
7
<PAGE> 11
<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)
Pasco County School
Board, (AMBAC Insured)
(Final maturity
8/1/26)*.............. VMIG1/Aaa A1+/AAA 3.30% 3/6/97 $ 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% 3/5/97 5,000,000 5,000,000
Sarasota County Public
Hospital District..... P1/Aa3 A1+/AA- 3.60% 5/23/97 5,000,000 5,000,000
Sarasota County Public
Hospital District..... VMIG1/NR NR/NR 3.55% 7/11/97 15,000,000 15,000,000
St. Lucie County
Pollution Control..... VMIG1/Aa3 A1+/AA- 3.50% 3/6/97 6,000,000 6,000,000
------------
67,740,588
------------
GEORGIA -- 2.8%
Burke County
Commercial Paper...... P1/Aa1 A1+/AAA 3.50% 4/9/97 4,200,000 4,200,000
Fulton County
Development Authority
(LOC -- Wachovia Bank)
(Final maturity
6/1/20)*.............. NR/NR A1+/AA+ 3.35% 3/5/97 2,300,000 2,300,000
Hapeville Development
Authority, Hapeville
Hotel Ltd., (LOC --
Deutsche Bank A.G.)
(Final maturity
11/1/15)*............. P1/Aa1 NR/NR 3.50% 3/3/97 8,100,000 8,100,000
------------
14,600,000
------------
ILLINOIS -- 8.5%
Chicago Tender Notes
(LOC -- Morgan
Guaranty, New York)
(Final maturity
1/31/99)**............ MIG1/VMIG1 A1+/Sp1 3.65% 2/5/98 15,000,000 15,000,000
Franklin Park (Final
maturity 7/1/22)*..... NR/NR NR/NR 3.40% 3/6/97 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 3.50% 3/3/97 9,185,000 9,185,000
Illinois Health
Facilities, Franciscan
Sisters Health (Final
maturity 1/1/18)*..... VMIG1/A2 NR/NR 3.50% 3/3/97 4,950,000 4,950,000
</TABLE>
- ---------------
See Notes to Financial Statements.
8
<PAGE> 12
<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>
ILLINOIS -- (CONTINUED)
Illinois Health
Facilities,
Resurrection Health
Care (Final maturity
5/1/11)*.............. VMIG1/A2 NR/NR 3.45% 3/3/97 $ 8,000,000 $ 8,000,000
------------
44,190,000
------------
INDIANA -- 2.6%
Jasper County
Pollution Control
Series A and C (Final
maturity 11/1/16)*.... VMIG1/A2 A1/A 3.50% 4/4/97 3,350,000 3,350,000
Rockport Pollution
Control, Indiana-
Michigan Power Company
Project (AMBAC
Insured) (Final
maturity 6/1/25)*..... NR/Aaa NR/AAA 3.30% 3/5/97 10,000,000 10,000,000
------------
13,350,000
------------
KANSAS -- 1.1%
Mission Multi-Family
Housing, Silverwood
Apartments Project
(Final maturity
9/15/26)*............. NR/NR A1+/AAA 3.35% 3/5/97 6,000,000 6,000,000
------------
LOUISIANA -- 4.1%
Ascension Parish,
Borden Inc. Project
(LOC -- Credit Suisse)
(Final maturity
12/1/09)*............. VMIG1/Aa3 A1+/AA+ 3.30% 3/5/97 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 3.45% 3/6/97 11,600,000 11,600,000
Plaquemines Port
Harbor & Term
District, Chevron Pipe
Line Company (Final
maturity 9/1/08)*..... NR/Aa3 NR/AA 3.85% 9/1/97 4,000,000 4,000,000
------------
21,100,000
------------
MISSOURI -- 5.0%
Columbia, Series A
(LOC -- Toronto
Dominion Bank) (Final
maturity 6/1/08)*..... VMIG1/Aa2 NR/NR 3.35% 3/5/97 2,500,000 2,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
9
<PAGE> 13
<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>
MISSOURI -- (CONTINUED)
Columbia Water &
Electric, Series B
(LOC -- Toronto
Dominion Bank) (Final
maturity 12/1/15)*.... VMIG1/Aa2 A1+/AA 3.35% 3/5/97 $ 1,400,000 $ 1,400,000
Independence
Industrial
Development, Resthaven
Project,
(LOC -- Credit Local
de France) (Final
maturity 2/1/25)*..... NR/NR A1+/AA+ 3.40% 3/5/97 3,900,000 3,900,000
Missouri State
Infrastructure
Facilities, Midtown
Redevelopment Project
(LOC -- Dai-Ichi
Kangyo, Los Angeles)
(Final maturity
12/1/18)*............. VMIG1/A1 NR/NR 3.48% 3/5/97 17,900,000 17,900,000
------------
25,700,000
------------
MONTANA -- 1.2%
Montana State Tax &
Revenue Anticipation
Notes................. MIG1/NR Sp1+/NR 4.50% 6/27/97 6,000,000 6,015,612
------------
NEBRASKA -- 0.7%
Nebraska Educational
Facilities (FGIC
Insured) (Final
maturity 12/1/00)*.... VMIG1/Aaa A1/AAA 3.40% 3/5/97 3,435,000 3,435,000
------------
NEW MEXICO -- 1.5%
New Mexico State
Highway Commission
(FSA Insured) (Final
maturity 6/15/11)*.... VMIG1/Aaa A1+/AAA 3.35% 3/5/97 8,000,000 8,000,000
------------
NEW YORK -- 3.0%
New York City Tax-
Exempt Water Eagle
Trust, Series 94C-2
(MBIA Insured) (Final
maturity 6/15/18)*.... NR/NR A1/AA 3.40% 3/6/97 10,000,000 10,000,000
New York State Dorm
Authority, St. Francis
Center at the Knolls
(LOC -- Banque
Paribas) (Final
maturity 7/1/23)*..... VMIG1/A2 NR/NR 3.50% 3/10/97 5,400,000 5,400,000
------------
15,400,000
------------
NORTH CAROLINA -- 5.7%
North Carolina Eastern
Water District........ NR/NR A1+/AAA 3.45% 5/13/97 5,175,000 5,175,000
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 14
<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 -- (CONTINUED)
North Carolina Medical
Care Community, Adult
Community Total
Services (LOC --
LaSalle National Bank,
Chicago) (Final
maturity 11/15/09)*... NR/NR A1+/AA+ 3.35% 3/6/97 $ 10,000,000 $ 10,000,000
North Carolina
Municipal Power
Agency................ P1/A A1+/A 3.40% 5/16/97 2,000,000 2,000,000
North Carolina
Municipal Power
Agency................ P1/A A1+/A- 3.40% 4/14/97 10,000,000 10,000,000
Wake County Pollution
Control, Series C
(LOC -- Sumitomo Bank,
Ltd.) (Final maturity
10/1/15)*............. P1/A1 A1/NR 3.50% 3/5/97 2,300,000 2,300,000
------------
29,475,000
------------
OHIO -- 1.0%
Hamilton County
Hospital Facilities
Bethesda Hospital,
Inc. (LOC -- Rabobank
Nederland) (Final
maturity 2/15/24)*.... VMIG1/Aaa A1+/AAA 3.20% 3/6/97 2,600,000 2,600,000
Ohio Air Quality
Development Authority,
Timken Project (LOC --
Credit Suisse) (Final
maturity 6/1/01)*..... P1/NR A1+/AA 3.30% 3/5/97 2,800,000 2,800,000
------------
5,400,000
------------
OREGON -- 0.8%
Clackamas County
Hospital Facilities
(Final maturity
4/1/14)*.............. NR/NR NR/AA 3.75% 4/1/97 4,350,000 4,350,000
------------
PENNSYLVANIA -- 9.6%
Allegheny County
Industrial
Development, Duquesne
Light Co., Series A
(LOC -- Canadian
Imperial Bank of
Commerce) (Final
maturity 9/1/11)*..... P1/NR A1+/AA- 3.65% 3/3/97 3,700,000 3,700,000
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 15
<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 -- (CONTINUED)
Allegheny County
Industrial
Development, Duquesne
Light Co.
(LOC -- Canadian
Imperial Bank of
Commerce) (Final
maturity 9/1/11)*..... NR/NR A1+/AA- 3.65% 3/3/97 $ 8,225,000 $ 8,225,000
Emmaus General
Authority, Subseries
D-12 (LOC - Canadian
Imperial Bank) (Final
maturity 3/1/24)*..... NR/NR A1+/Sp1 3.35% 3/5/97 6,600,000 6,600,000
Philadelphia Gas
Works, Series B....... P1/NR A1+/NR 3.50% 3/21/97 5,000,000 5,000,000
Quakertown General
Authority, Series A
(LOC - PNC Bank)
(Final maturity
7/1/26)*.............. P1/A1 NR/NR 3.35% 3/4/97 10,000,000 10,000,000
Quakertown Hospital
Authority, HPS Group
Pooled Financing
(LOC -- PNC Bank)
(Final maturity
7/1/05)............... VMIG1/A1 NR/NR 3.35% 3/4/97 10,000,000 10,000,000
Schuylkill County
Industrial
Development, Westwood
Energy Project
(LOC -- Fuji Bank LTD)
(Final maturity
11/1/09)*............. P1/A1 NR/NR 3.55% 3/3/97 6,300,000 6,300,000
------------
49,825,000
------------
RHODE ISLAND -- 0.9%
Rhode Island Housing,
Series 22-A (FGIC
Insured) (Final
maturity 4/1/27)**.... VMIG1/Aa2 A1+/AA+ 3.65% 12/2/97 4,615,000 4,615,000
------------
SOUTH CAROLINA -- 0.9%
South Carolina Jobs
Economic Authority,
Tuomey Regional
Medical Center, Series
B (MBIA Insured)
(Final maturity
11/1/25)*............. VMIG1/Aaa A1+/AAA 3.30% 3/6/97 4,800,000 4,800,000
------------
TENNESSEE -- 4.7%
Bristol Health &
Education, Bristol
Memorial Hospital,
Series 95-A (FGIC
Insured) (Final
maturity 3/1/14)*..... NR/NR A1/AAA 3.50% 3/5/97 8,500,000 8,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 16
<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>
TENNESSEE -- (CONTINUED)
Metropolitan
Government Nashville &
Davidson County Health
& Education
Facilities,
Adventist/Sunbelt,
Series A (LOC --
Suntrust) (Final
maturity 11/15/26)*... VMIG1/Aa3 A1+/AA- 3.30% 3/6/97 $ 6,000,000 $ 6,000,000
Shelby County Tax &
Revenue Receipts
(Final maturity
11/1/21)*............. NR/NR A1+/AAA 3.40% 3/6/97 10,000,000 10,000,000
------------
24,500,000
------------
TEXAS -- 12.7%
Angelina & Neches
River Authority, Solid
Waste Revenue, Series
B -- E (LOC -- Credit
Suisse) (Final
maturity 5/1/14)*..... P1/Aa3 NR/NR 3.45% 3/3/97 13,700,000 13,700,000
Brownsville Texas
Utility System........ P1/NR A1+/NR 3.50% 7/15/97 8,000,000 8,000,000
Grand Prairie Housing,
Lincoln Property
Company (Final
maturity 6/1/10)*..... NR/NR A1+/AAA 3.35% 3/5/97 6,700,000 6,700,000
Sulpher Springs Texas
Industrial Development
Hon Industries, Inc.
Project (LOC -- Credit
Suisse) (Final
maturity 12/1/13)*.... NR/NR NR/NR 3.40% 3/5/97 5,400,000 5,400,000
Texas Department of
Housing............... P1/NR A1+/NR 3.55% 6/26/97 6,545,000 6,545,000
Texas Tax & Revenue
Anticipation Notes.... MIG1/NR Sp1+/NR 4.75% 8/29/97 20,000,000 20,077,472
University of Texas
Board of Regents...... P1/NR A1+/NR 3.55% 5/23/97 1,440,000 1,440,000
University of Texas
Board of Regents...... P1/NR A1+/NR 3.35% 4/10/97 3,860,000 3,860,000
------------
65,722,472
------------
UTAH -- 4.4%
Intermountain Power
Agency, Power Supply
Revenue (Final
maturity 7/1/03)*..... VMIG1/Aaa NR/NR 3.50% 3/5/97 9,900,000 9,900,000
Intermountain Power
Agency, Power Supply
Revenue, Series E
(LOC -- Morgan
Guaranty Trust) (Final
maturity 7/1/21)**.... VMIG1/Aa1 A1+/AAA 3.93% 6/16/97 5,000,000 5,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 17
<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>
UTAH -- (CONTINUED)
Utah State Housing
Finance Agency, Single
Family, Series 4
(Final maturity
1/1/28)*.............. VMIG1/Aa1 NR/NR 3.45% 3/5/97 $ 8,000,000 $ 8,000,000
--------------
22,900,000
--------------
WASHINGTON -- 1.7%
Washington State
Health Care Facilities
Authority, Fred
Hutchinson Cancer
Center (LOC -- Morgan
Guaranty Trust) (Final
maturity 1/1/23)*..... VMIG1/Aa1 NR/NR 3.45% 3/3/97 9,000,000 9,000,000
--------------
WISCONSIN -- 0.5%
Oak Creek Pollution
Control, Wisconsin
Electric Power Co.
Project (Final
maturity 8/1/16)*..... P1/Aa3 NR/AA 3.35% 3/5/97 2,700,000 2,700,000
--------------
Total Short-Term Tax-
Exempt Investments
(Amortized cost
$517,260,618)......... 517,260,618
--------------
TOTAL INVESTMENTS -- 99.6%
(AMORTIZED COST
$517,260,618) (A)..... $ 517,260,618
Other assets in excess
of
liabilities -- 0.4%... 2,272,959
--------------
NET ASSETS -- 100.0%... $ 519,533,577
==============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $519,533,577.
(a) Cost for federal income tax and financial reporting purposes is
substantially the same.
<TABLE>
<C> <S>
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.
</TABLE>
* 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.
14
<PAGE> 18
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
February 28, 1997
- --------------------------------------------------------------------------------
<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 -- 101.1%
CALIFORNIA -- 100.1%
Alameda County Tax &
Revenue Anticipation
Notes................. MIG/NR Sp1+/NR 4.50% 6/30/97 $ 10,500,000 $ 10,518,410
California Department
of Water.............. P1/Aa A1+/AA 3.30% 4/14/97 2,500,000 2,500,000
California Department
of Water.............. P1/Aa A1+/AA 3.45% 5/22/97 2,000,000 2,000,000
California General
Obligation............ P1/Aa A1+/AA 3.40% 4/10/97 8,500,000 8,500,000
California General
Obligation............ P1/NR A1/NR 3.45% 5/5/97 5,000,000 5,000,000
California General
Obligation Trust
Receipts, Series SGB15
(Final maturity
8/1/19)*.............. NR/NR A1+/AAA 3.30% 3/6/97 7,175,000 7,175,000
California General
Obligation, Class A,
Various Purpose,
Certificates of
Participation (MBIA
Insured) (Final
maturity 2/1/06)*..... P1/Aaa A1+/AAA 3.35% 3/6/97 10,000,000 10,000,000
California Health
Facilities Financing
Authority, Catholic
Healthcare, Series B
(MBIA Insured) (Final
maturity 7/1/06)*..... VMIG1/Aaa A1+/AAA 3.15% 3/5/97 2,285,000 2,285,000
California Health
Facilities Financing
Authority, St. Joseph
Health System, Series
B (Final maturity
7/1/09)*.............. VMIG1/Aa3 A1+/AA 3.35% 3/3/97 6,100,000 6,100,000
California Health
Facilities Financing
Authority, Sutter
Health, Series B
(LOC -- Morgan
Guaranty Trust) (Final
maturity 3/1/20)*..... VMIG1/Aa1 A1+/AAA 3.35% 3/3/97 3,400,000 3,400,000
California Housing
Financing Agency
(Final maturity
8/1/16)*.............. P1/Aaa A1/AAA 3.50% 5/1/97 4,700,000 4,700,000
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 19
<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 -- (CONTINUED)
California Housing
Financing Agency,
Multi-Family Housing,
Series C (Final
maturity 7/15/13)*.... NR/NR A1+/AAA 3.20% 3/5/97 $ 5,400,000 $ 5,400,000
California Local
Government Joint
Powers, Certificates
of Participation,
Series 1 (LOC -- Fuji
Bank Ltd., Los
Angeles) (Final
maturity 8/1/16)*..... VMIG1/A1 NR/NR 3.30% 3/5/97 1,100,000 1,100,000
California Pollution
Control Financing
Authority, Atlantic
Richfield Project,
Series A (AMT) (Final
maturity 12/1/24)*.... VMIG1/A2 A1/A 3.45% 3/3/97 8,800,000 8,800,000
California Pollution
Control Financing
Authority, Chevron
USA, Inc. Project,
Callable 4/18/97 @100,
Putable 11/15/97 @100
(Final maturity
11/15/01)*............ NR/Aa2 NR/AA 3.90% 5/15/97 2,405,000 2,409,395
California Pollution
Control Financing
Authority, Colmac
Energy Project, Series
A (AMT) (LOC -- Swiss
Bank) (Final maturity
12/1/16)*............. NR/NR A1+/AA+ 3.25% 3/5/97 2,300,000 2,300,000
California Pollution
Control Financing
Authority, Delano
Power Project (AMT)
(LOC -- Algemene Bank
Nederland) (Final
maturity 8/1/19)*..... NR/Aa1 NR/NR 3.45% 3/3/97 1,000,000 1,000,000
California Pollution
Control Financing
Authority, Delano
Power Project (AMT)
(LOC -- Algemene Bank
Nederland) (Final
maturity 8/1/19)*..... NR/Aa1 NR/NR 3.45% 3/3/97 5,100,000 5,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 20
<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 -- (CONTINUED)
California Pollution
Control Financing
Authority, HL Power
Co. Project (AMT)
(LOC -- Banque
Nationale de Paris)
(Final maturity
9/1/18)*.............. NR/Aa3 NR/NR 3.45% 3/3/97 $ 2,300,000 $ 2,300,000
California Pollution
Control Financing
Authority, Pacific Gas
& Electric............ P1/Aaa A1+/AAA+ 3.45% 7/16/97 15,000,000 15,000,000
California Pollution
Control Financing
Authority, Pacific Gas
& Electric............ P1/Aa A+/AA+ 3.45% 7/15/97 5,000,000 5,000,000
California Pollution
Control Financing
Authority, Pacific Gas
and Electric, Series B
(AMT) (LOC -- Rabobank
Nederland) (Final
maturity 12/1/16)*.... NR/NR A1+/AAA 3.25% 3/5/97 5,000,000 5,000,000
California Pollution
Control Financing
Authority, Pacific Gas
and Electric, Series A
(AMT) (LOC -- Swiss
Bank) (Final maturity
12/1/16)*............. NR/NR A1+/AAA 3.30% 3/5/97 32,000,000 32,000,000
California Pollution
Control Financing
Authority, Shell Oil
Company Martinez
Project, Series B
(AMT) (Final maturity
10/1/31)*............. VMIG1/Aa1 A1+/AAA 3.25% 3/5/97 6,000,000 6,000,000
California Pollution
Control Financing
Authority, Shell Oil
Company Martinez
Project, Series A
(AMT) (Final maturity
10/1/24)*............. VMIG1/Aa1 NR/NR 3.40% 3/3/97 16,000,000 16,000,000
California Pollution
Control Financing
Authority, Solid Waste
Disposal Revenue Bond,
Taormina Industries,
Inc. (AMT) (LOC --
Sanwa Bank, Los
Angeles, Sanwa Bank,
Ltd.) (Final maturity
8/1/14)*.............. VMIG1/Aa3 NR/NR 3.50% 3/5/97 1,285,000 1,285,000
</TABLE>
- ---------------
See Notes to Financial Statements.
17
<PAGE> 21
<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 -- (CONTINUED)
California Pollution
Control Financing
Authority, Solid Waste
Disposal Rev. Bond,
Taormina Industries,
Inc. (AMT) (LOC --
Sanwa Bank, Los
Angeles, Sanwa Bank,
Ltd.) (Final maturity
8/1/14)*.............. VMIG1/Aa3 NR/NR 3.50% 3/5/97 $ 5,500,000 $ 5,500,000
California Pollution
Control Financing
Authority, Southern
California Edison..... P1/A2 A1/A+ 3.40% 5/21/97 2,000,000 2,000,000
California Pollution
Control Financing
Authority, Southern
California Edison..... P1/A2 A1/A+ 3.30% 4/10/97 3,600,000 3,600,000
California State
Department of Water
(Final maturity
12/1/29)*............. NR/Aa A+/AA 3.30% 3/6/97 8,300,000 8,300,000
California State,
Series A.............. MIG1/NR Sp1+/NR 4.50% 6/30/97 32,900,000 32,964,807
California Statewide
Community Development
Authority, Apartment
Development Revenue,
Series A-2 (Final
maturity 5/15/25)*.... NR/NR NR/AAA 3.15% 3/5/97 24,000,000 24,000,000
California Statewide
Community Development
Authority, Calsonic
Project (AMT)
(LOC -- Union Bank)
(Final maturity
8/1/08)*.............. NR/NR NR/NR 3.40% 3/5/97 7,000,000 7,000,000
California Statewide
Community Development
Authority, North
California Retired
Officers (LOC --
Dresdner Bank A.G.)
(Final maturity
6/1/26)*.............. VMIG1/Aaa NR/NR 3.35% 3/3/97 22,300,000 22,300,000
California Statewide
Community Development
Authority, Apartment
Development Revenue,
Series A-1 (Final
maturity 5/15/25)*.... NR/NR NR/AAA 3.15% 3/5/97 8,100,000 8,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
18
<PAGE> 22
<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 -- (CONTINUED)
California Statewide
Community Development
Authority, Apartment
Development Revenue,
Series A-5 (Final
maturity 5/15/25)*.... NR/NR NR/AAA 3.15% 3/5/97 $ 10,000,000 $ 10,000,000
California Statewide
Community Development
Authority, Apartment
Development Revenue,
Series A-6 (Final
maturity 5/15/25)*.... NR/NR NR/AAA 3.15% 3/5/97 16,900,000 16,900,000
California Statewide
Community Development
Authority, Series A-7
(AMT) (Final maturity
5/15/25)*............. NR/NR NR/AAA 3.30% 3/5/97 2,800,000 2,800,000
California Statewide
Community Development
Authority, Solid Waste
Facilities, Chevron
USA Project (AMT)
(Final maturity
12/15/24)*............ NR/Aa2 NR/NR 3.40% 3/3/97 3,400,000 3,400,000
California Statewide
Community Development
Authority, Tax &
Revenue Anticipation
Notes, Series A....... MIG1/NR Sp1+/NR 4.75% 6/30/97 10,000,000 10,023,901
California Statewide
Community Development
Corporation,
Industrial
Development, Carvin
Project, Series A
(LOC -- California
State Teacher's
Retirement) (Final
maturity 6/1/10)*..... NR/NR A1+/AA+ 3.30% 3/5/97 2,175,000 2,175,000
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 23
<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 -- (CONTINUED)
California Statewide
Community Development
Corporation,
Industrial
Development, Pascon
Project, Series B
(AMT) (LOC --
California State
Teacher's Retirement)
(Final maturity
12/1/14)*............. NR/NR NR/NR 3.30% 3/5/97 $ 2,825,000 $ 2,825,000
Campbell California
Elementary School
District Tax & Revenue
Anticipation Notes.... MIG1/NR NR/NR 4.50% 7/2/97 2,000,000 2,003,237
Chula Vista Industrial
Development, San Diego
Gas and Electric,
Series B (AMT) (Final
maturity 12/1/27)*.... VMIG1/A1 A1/A+ 3.35% 3/5/97 11,000,000 11,000,000
Chula Vista Industrial
Development (AMT)..... P1/A1 A1/A+ 3.55% 7/16/97 3,000,000 3,000,000
Chula Vista Industrial
Development, San Diego
Gas and Electric,
Series B (AMT) (Final
maturity 12/1/21)*.... P1/A2 A1/A 3.60% 3/3/97 26,000,000 26,000,000
Chula Vista Multi-
Family Housing, Terra
Nova Association
Project, Series A
(LOC -- Industrial
Bank of Japan, Ltd.)
(Final maturity
3/1/05)*.............. NR/NR A1/A 3.35% 3/5/97 5,000,000 5,000,000
Contra Costa County
Multi-Family Housing
(AMT) (LOC -- Sumitomo
Bank, Ltd.) (Final
maturity 8/1/32)*..... NR/NR A1/A+ 3.50% 3/5/97 8,000,000 8,000,000
Foothill/Eastern
Corridor Agency, Toll
Road Revenue, Series B
(LOC -- Morgan
Guaranty Trust) (Final
maturity 1/2/35)*..... NR/NR A1+/AAA 3.20% 3/6/97 12,700,000 12,700,000
Foothill Eastern Toll
Road, Series D
(LOC -- Industrial
Bank of Japan) (Final
maturity 1/2/35)*..... NR/NR A1/A 3.25% 3/6/97 13,500,000 13,500,000
</TABLE>
- ---------------
See Notes to Financial Statements.
20
<PAGE> 24
<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 -- (CONTINUED)
Foothill Eastern Toll
Road, Series E
(LOC -- Banque
National Paris) (Final
maturity 1/2/35)*..... NR/NR A1/A+ 3.30% 3/5/97 $ 5,000,000 $ 5,000,000
Fremont California
Certificates of
Participation
(LOC -- Sumitomo Bank)
(Final maturity
8/1/22)*.............. NR/NR A1/A 3.35% 3/6/97 3,200,000 3,200,000
Fremont California
Certificates of
Participation,
Building and Equipment
Project
(LOC -- Sumitomo Bank,
Ltd.) (Final maturity
7/1/15)*.............. NR/NR A1/A 3.35% 3/6/97 4,250,000 4,250,000
Grand Terrace
Community
Redevelopment Agency,
Mt. Vernon Villas
(LOC -- Industrial
Bank of Japan) (Final
maturity 12/1/11)*.... NR/NR A1/A 3.35% 3/5/97 1,650,000 1,650,000
Huntington Beach
Multi-Family Housing,
Huntington Breakers,
Series A
(LOC -- Sumitomo Bank,
Ltd.) (Final maturity
7/1/14)*.............. VMIG1/A1 NR/NR 3.25% 3/5/97 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+ 3.25% 3/6/97 3,010,000 3,010,000
Irvine Improvement
Board Act 1915,
District 89-10
(LOC -- National
Westminster PLC)
(Final maturity
9/2/15)*.............. VMIG1/Aa2 A1+/AA 3.35% 3/3/97 500,000 500,000
Irvine Improvement
Board Act 1915,
District 94-15
(LOC -- Dai-Ichi
Kangyo Los Angeles)
(Final maturity
9/2/20)*.............. VMIG1/A1 A1/A 3.40% 3/3/97 17,200,000 17,200,000
</TABLE>
- ---------------
See Notes to Financial Statements.
21
<PAGE> 25
<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 -- (CONTINUED)
Kern County
Certificates of
Participation, Kern
Public Facilities
Project, Series C
(LOC -- Union Bank of
Switzerland) (Final
maturity 8/1/06)*..... VMIG1/Aaa NR/NR 3.15% 3/5/97 $ 3,400,000 $ 3,400,000
Kern County High
School District, Tax &
Revenue Anticipation
Notes................. NR/NR Sp1+/NR 4.50% 7/31/97 10,000,000 10,024,095
Los Angeles Community
Multi-Family Housing,
Academy Village,
Series A (AMT)
(LOC -- Swiss Bank)
(Final maturity
10/1/19)*............. VMIG1/Aa1 NR/NR 3.30% 3/6/97 15,000,000 15,000,000
Los Angeles Community
Multi-Family Housing,
Grande Pomenade
Project (LOC -- Tokai
Bank, Los Angeles,
Barclays Bank PLC)
(Final maturity
12/1/10)*............. NR/NR A1+/AAA 3.20% 3/6/97 25,900,000 25,900,000
Los Angeles County.... P1/NR A1/NR 3.45% 4/8/97 3,500,000 3,500,000
Los Angeles County
Metropolitan
Transportation
Authority, Series SGB1
(Final maturity
7/1/25)*.............. NR/NR A1+/AAA 3.30% 3/6/97 3,500,000 3,500,000
Los Angeles County
Metropolitan
Transportation
Authority, Series SGB3
(Final maturity
7/1/16)*.............. NR/NR A1+/AAA 3.30% 3/6/97 5,400,000 5,400,000
Los Angeles County
Metropolitan
Transportation
Authority, Series SGB2
(Final maturity
7/1/21)*.............. NR/NR A1+/AAA 3.30% 3/6/97 23,000,000 23,000,000
Los Angeles County
Metropolitan
Transportation
Authority (Final
maturity 7/1/17)*..... NR/NR A1+/AAA 3.25% 3/6/97 2,100,000 2,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 26
<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 -- (CONTINUED)
Los Angeles County
Multi-Family Housing,
Sandi Canyon Villas
(AMT) (LOC --
Industrial Bank of
Japan) (Final maturity
11/1/09)*............. VMIG1/A1 NR/NR 3.40% 3/5/97 $ 2,000,000 $ 2,000,000
Los Angeles County
Pension Obligation,
Series A (AMBAC
Insured) (Final
maturity 6/30/07)*.... VMIG1/Aaa A1+/AAA 3.20% 3/5/97 20,000,000 20,000,000
Los Angeles County
Pension Obligation,
Series B (AMBAC
Insured) (Final
maturity 6/30/07)*.... VMIG1/Aaa A1+/AAA 3.20% 3/5/97 1,000,000 1,000,000
Los Angeles County
Public Works, Series A
(MBIA Insured)........ NR/Aaa NR/AAA 4.50% 9/1/97 5,000,000 5,015,125
Los Angeles Multi-
Family Housing,
Channel Gateway
Apartments, Series B
(AMT) (LOC -- Fuji
Bank) (Final maturity
8/1/19)*.............. VMIG1/A1 NR/NR 3.45% 3/6/97 6,700,000 6,700,000
Los Angeles Unified
School District, Tax &
Revenue Anticipation
Notes, Series B....... MIG1/NR Sp1+/NR 4.50% 9/30/97 8,500,000 8,541,113
Los Angeles Wastewater
System................ P1/NR A1+/NR 3.45% 5/9/97 15,000,000 15,000,000
Monterey County
Financing Authority,
Reclamation and
Distribution Project
(LOC -- Dai-Ichi
Kangyo, Los Angeles)
(Final maturity
9/1/36)*.............. VMIG1/A1 NR/NR 3.40% 3/6/97 5,100,000 5,100,000
Monterey Peninsula
Water Management
District, Reclamation
Project, (LOC --
Sumitomo Bank) (Final
maturity 7/1/22)*..... VMIG1/A1 A1/A 3.40% 3/6/97 15,300,000 15,300,000
Newport Beach, Hoag
Memorial Hospital,
(Final maturity
10/1/22)*............. VMIG1/A1 A1+/AA 3.35% 3/3/97 1,000,000 1,000,000
Newport Beach, Hoag
Memorial Hospital,
Series A (Final
maturity 10/1/26)*.... NR/NR A1+/AA 3.35% 3/3/97 7,900,000 7,900,000
</TABLE>
- ---------------
See Notes to Financial Statements.
23
<PAGE> 27
<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 -- (CONTINUED)
Newport Beach, Hoag
Memorial Hospital,
Series C (Final
maturity 10/1/26)*.... NR/NR A1+/AA 3.35% 3/3/97 $ 12,000,000 $ 12,000,000
Oakland, Children's
Hospital Medical
Center, Series B
(LOC -- Banque
National Paris) (Final
maturity 7/1/99)*..... NR/NR A1/A+ 3.30% 3/5/97 4,600,000 4,600,000
Orange County
Apartment Development,
Bear Brand Apartments,
Series Z (LOC -- Fuji
Bank, Credit Suisse)
(Final maturity
11/1/07)*............. VMIG1/Aa2 NR/NR 3.25% 3/6/97 8,000,000 8,000,000
Orange County
Apartment Development,
Laguna Summit
Apartments, Series X
(LOC - Tokai Bank LTD,
Chase Manhattan)
(Final maturity
11/1/08)*............. VMIG2/A2 NR/NR 3.30% 3/4/97 8,500,000 8,500,000
Orange County Housing
Authority, Costa
Partner Development,
Series BB (LOC --
Tokai Bank, New York)
(Final maturity
12/1/09)*............. VMIG1/Aa3 NR/NR 3.30% 3/5/97 12,200,000 12,200,000
Orange County
Improvement Board,
Assessment District
88-1 (LOC -- Societe
Generale, Kredietbank
N.V.) (Final maturity
9/2/18)*.............. VMIG1/Aa2 A1+/AA- 3.40% 3/3/97 14,000,000 14,000,000
Orange County, Pointe
Niguel Project, Series
C (LOC -- First
Interstate Bancorp)
(Final maturity
11/1/05)*............. VMIG1/Aa3 NR/NR 3.50% 3/6/97 13,000,000 13,000,000
Orange County
Sanitation Districts,
Certificates of
Participation (AMBAC
Insured) (Final
maturity 8/1/13)*..... VMIG1/Aaa A1+/AAA 3.15% 3/6/97 3,100,000 3,100,000
</TABLE>
- ---------------
See Notes to Financial Statements.
24
<PAGE> 28
<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 -- (CONTINUED)
Orange County
Sanitation Districts,
Certificates of
Participation, Series
C (FGIC Insured)
(Final maturity
8/1/17)*.............. VMIG1/Aaa A1+/AAA 3.40% 3/3/97 $ 8,500,000 $ 8,500,000
Orange County Water... P1/Aaa A1+/AA+ 3.35% 5/16/97 4,000,000 4,000,000
Otay Water District,
Certificates of
Participation
(LOC -- Landesbank
Hessen) (Final
maturity 9/1/26)*..... VMIG1/Aaa A1+/AAA 3.15% 3/5/97 2,200,000 2,200,000
Placer Unified High
School District (FGIC
Insured).............. MIG1/NR Sp1+/NR 4.45% 9/4/97 3,700,000 3,709,466
Redlands Certificates
of Participation (FGIC
Insured) (Final
maturity 9/1/17)*..... VMIG1/Aaa A1+/AAA 3.25% 3/5/97 3,620,000 3,620,000
Redlands Certificates
of Participation,
Water Treatment
Facilities Project,
(FGIC Insured) (Final
maturity 9/1/15)*..... VMIG1/Aaa A1+/AAA 3.25% 3/5/97 2,500,000 2,500,000
Riverside County...... P1/A1 A1/A 3.40% 5/8/97 3,000,000 3,000,000
Riverside County
Industrial
Development, Advanced
Business Forms, Inc.
Project, (AMT),
(LOC -- First National
Bank) (Final maturity
4/1/14)*.............. VMIG1/Aaa NR/NR 3.25% 3/6/97 1,500,000 1,500,000
Riverside County
Industrial
Development, Cryogenic
Project Issue B (AMT)
(LOC -- Rabobank
Nederland) (Final
maturity 7/5/14)*..... VMIG1/Aaa NR/NR 3.25% 3/6/97 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 3.25% 3/6/97 3,050,000 3,050,000
</TABLE>
- ---------------
See Notes to Financial Statements.
25
<PAGE> 29
<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 -- (CONTINUED)
Sacramento County
Multi-Family Housing,
Series A
(LOC -- Dai-Ichi
Kangyo) (Final
maturity 4/15/07)*.... VMIG1/A1 A1/A+ 3.40% 3/6/97 $ 15,400,000 $ 15,400,000
Sacramento County
Multi-Family Housing,
Series C
(LOC -- Dai-Ichi
Kangyo) (Final
maturity 4/15/07)*.... VMIG1/A1 A1/A+ 3.40% 3/6/97 1,600,000 1,600,000
Sacramento County Tax
& Revenue Anticipation
Notes................. MIG/NR Sp1+/NR 4.50% 9/30/97 32,000,000 32,136,477
Sacramento Municipal
Water District........ P1/Aaa A1+/AAA 3.25% 4/9/97 5,000,000 5,000,000
San Bernardino County
Multi-Family Housing,
Brookside Meadows,
Series A (LOC -- Tokai
Bank, Chase Manhattan)
(Final maturity
8/1/05)*.............. VMIG1/Aa3 NR/NR 3.25% 3/5/97 8,400,000 8,400,000
San Bernardino County
Certificates of
Participation, County
Center Project
(LOC -- Canadian
Imperial Bank) (Final
maturity 7/1/15)*..... VMIG1/Aa3 NR/NR 3.25% 3/5/97 4,000,000 4,000,000
San Bernardino County
Multi-Family Housing
(LOC -- First
Nationwide Bank)
(Final maturity
7/1/14)*.............. NR/NR A1+/AAA 3.20% 3/5/97 5,850,000 5,850,000
San Bernardino County
Tax & Revenue
Anticipation Notes
(LOC -- Toronto
Dominion Bank,
Landesbank Hessen, New
York)................. MIG/NR Sp1+/NR 4.50% 6/30/97 6,000,000 6,011,967
San Diego City
Industrial Development
Authority............. VMIG1/Aa3 NR/NR 3.35% 4/23/97 1,500,000 1,500,000
San Diego County Tax &
Revenue Anticipation
Notes (LOC --
Commerzbank
Aktiengeselt, Canadian
Imperial Bank)........ MIG1/NR Sp1+/NR 4.38% 9/30/97 24,100,000 24,181,875
</TABLE>
- ---------------
See Notes to Financial Statements.
26
<PAGE> 30
<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 -- (CONTINUED)
San Diego Industrial
Development
Authority............. NR/NR NR/NR 3.30% 4/9/97 $ 5,000,000 $ 5,000,000
San Diego Housing
Authority, Multi-
Family Housing, Nobel
Ct. Apartments, Series
L (LOC -- Citibank,
New York) (Final
maturity 12/1/08)*.... VMIG1/Aa3 NR/NR 3.20% 3/6/97 1,800,000 1,800,000
San Diego Housing
Authority, Multi-
Family Housing, Nobel
Ct. Apartments
(LOC -- Tokai Bank,
New York, Credit
Suisse) (Final
maturity 12/1/08)*.... VMIG1/Aa3 NR/NR 3.20% 3/6/97 10,000,000 10,000,000
San Francisco City and
County Airport (Final
maturity 5/1/21)*..... NR/NR NR/NR 3.25% 3/6/97 5,345,000 5,345,000
San Francisco City and
County Multi-Family
Housing, Bayside
Village Project D,
Series A
(LOC -- Industrial
Bank of Japan LTD)
(Final maturity
12/1/05)*............. VMIG1/A1 NR/NR 3.40% 3/6/97 1,000,000 1,000,000
San Francisco City and
County Multi-Family
Housing, Fillmore
Center, Series B-1
(LOC -- Bank of Nova
Scotia) (Final
maturity 12/1/17)*.... NR/NR A1+/AA- 3.20% 3/5/97 5,000,000 5,000,000
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- 3.20% 3/4/97 1,600,000 1,600,000
San Francisco City and
County Tax & Revenue
Anticipation Notes.... MIG1/NR Sp1+/NR 4.50% 10/8/97 23,000,000 23,108,640
Santa Clara Electric
Revenue, Series A
(LOC -- National
Westminster Bank, PLC)
(Final maturity
7/1/10)*.............. VMIG1/Aa2 NR/NR 3.25% 3/5/97 1,000,000 1,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
27
<PAGE> 31
<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 -- (CONTINUED)
Santa Clara Electric
Revenue, Series B
(LOC -- National
Westminster Bank, PLC)
(Final maturity
7/1/10)*.............. VMIG1/Aa2 NR/NR 3.25% 3/5/97 $ 3,100,000 $ 3,100,000
Santa Cruz County
Office of Education
Tax & Revenue
Anticipation Notes.... NR/NR Sp1+/NR 4.50% 6/30/97 22,150,000 22,195,924
Simi Valley Multi-
Family Housing,
Lincoln Wood Ranch
(LOC -- Sumitomo Bank,
LTD) (Final maturity
6/1/10)*.............. NR/NR A1/A 3.35% 3/6/97 7,500,000 7,500,000
Southeast Recovery
Facility, Series A
(LOC -- Industrial
Bank of Japan Ltd.)
(Final maturity
12/1/18)*............. VMIG1/A1 A1/A+ 3.40% 3/5/97 15,000,000 15,000,000
Southeast Recovery
Facility, Series B
(AMT) (LOC --
Industrial Bank of
Japan Ltd.) (Final
maturity 12/1/18)*.... VMIG1/A1 A1/A 3.50% 3/5/97 3,300,000 3,300,000
Southern California
Metropolitan Water
District.............. P1/NR A1+/NR 3.40% 5/22/97 4,000,000 4,000,000
Southern California
Metropolitan Water
District.............. P1/NR A1+/NR 3.40% 5/23/97 5,700,000 5,700,000
Southern California
Public Power
Authority, Southern
Transmission (AMBAC
Insured) (LOC -- Swiss
Bank) (Final maturity
7/1/19)*.............. VMIG1/Aaa A1+/AAA 3.20% 3/5/97 5,000,000 5,000,000
Southern California
Public Power
Authority, Southern
Transmission, Series B
(FSA Insured) (Final
maturity 7/1/23)*..... VMIG1/Aaa A1+/AAA 3.10% 3/5/97 7,500,000 7,500,000
Tahoe-Truckee Unified
School District
(GIC-FGIC Insured).... NR/NR Sp1+/NR 4.45% 9/4/97 4,000,000 4,010,234
</TABLE>
- ---------------
See Notes to Financial Statements.
28
<PAGE> 32
<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 -- (CONTINUED)
Vallejo Industrial
Development Authority,
Meyer Cookware
Project, Series A
(AMT) (LOC -- Bank of
Tokyo) (Final maturity
12/1/23)*............. NR/NR A1/A+ 3.50% 3/5/97 $ 3,300,000 $ 3,300,000
Washington Township
Hospital, Series A
(LOC -- Industrial
Bank of Japan) (Final
maturity 1/1/16)*..... VMIG1/A1 NR/NR 3.35% 3/6/97 8,900,000 8,900,000
--------------
994,774,666
PUERTO RICO -- 1.0%
Puerto Rico Public
Buildings Authority,
Trust Receipts, Series
SGA16 (Final maturity
7/1/21)*.............. NR/NR A1+/AAA 3.20% 3/5/97 9,380,000 9,380,000
--------------
TOTAL INVESTMENTS -- 101.1%
(AMORTIZED COST
$1,004,154,666)(A).... $1,004,154,666
Liabilities in excess
of other assets --
(1.1%)................ (10,432,676)
--------------
NET ASSETS -- 100.0%... $ 993,721,990
==============
<FN>
- ---------------
Percentages indicated are based on net assets of $993,721,990.
(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.
GIC -- Guaranteed Investment Contract
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.
</TABLE>
See Notes to Financial Statements.
29
<PAGE> 33
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
February 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY MARKET
FUND FUND
------------ --------------
<S> <C> <C>
ASSETS:
Investment in securities, at value (amortized cost $517,260,618
and $1,004,154,666, respectively)............................... $517,260,618 $1,004,154,666
Cash.............................................................. 489,812 280,383
Interest receivable............................................... 2,971,350 7,276,879
Prepaid expenses.................................................. 23,963 3,810
------------ ------------
Total Assets....................................................... 520,745,743 1,011,715,738
------------ ------------
LIABILITIES:
Dividends payable................................................. 952,325 479,921
Payable for investment securities purchased....................... -- 17,000,000
Investment advisory fees payable.................................. 40,819 75,781
Administration fees payable....................................... 40,819 75,781
Special management fees payable (Pacific Horizon Shares).......... 21,295 119,914
Shareholder service fees payable (Horizon Service Shares)......... 32,530 87,076
Shareholder service fees payable (X Shares)....................... -- 8,693
12b-1 fees payable (X Shares)..................................... -- 6,068
Transfer agent fees payable....................................... 1,251 3,686
Legal fees payable................................................ 3,978 5,991
Other accrued expenses............................................ 119,149 130,837
------------ ------------
Total Liabilities.................................................. 1,212,166 17,993,748
------------ ------------
NET ASSETS......................................................... $519,533,577 $ 993,721,990
============ ============
Net Assets:
Pacific Horizon Shares............................................ $ 86,422,845 $ 493,067,483
Horizon Shares.................................................... 264,122,607 --
Horizon Service Shares............................................ 168,988,125 471,557,505
X Shares.......................................................... -- 29,097,002
------------ ------------
Total.............................................................. $519,533,577 $ 993,721,990
============ ============
Shares Outstanding
($0.001 par value, 7.5 billion and 3 billion shares authorized,
respectively):
Pacific Horizon Shares............................................ 86,443,891 493,061,576
Horizon Shares.................................................... 264,254,618 --
Horizon Service Shares............................................ 169,007,349 471,575,295
X Shares.......................................................... -- 29,097,139
------------ ------------
Total.............................................................. 519,705,858 993,734,010
============ ============
NET ASSET VALUE, OFFERING PRICE, AND
REDEMPTION PRICE PER SHARE........................................ $ 1.00 $ 1.00
============ ============
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................... $ 519,706 $ 993,734
Additional paid-in capital........................................ 519,149,456 992,676,815
Accumulated undistributed net investment income................... 52,442 62,301
Accumulated net realized losses on investment transactions........ (188,027) (10,860)
------------ ------------
NET ASSETS, FEBRUARY 28, 1997...................................... $519,533,577 $ 993,721,990
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
30
<PAGE> 34
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Operations
For the year ended February 28, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
MONEY MONEY MARKET
FUND FUND
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest................................................ $15,560,509 $28,992,751
----------- -----------
EXPENSES:
Investment advisory fees................................ 444,648 849,799
Administration fees..................................... 444,648 849,799
Special management fees (Pacific Horizon Shares)........ 187,663 1,785,019
Shareholder service fees (Horizon Service Shares)....... 276,447 830,774
Shareholder service fees (X Shares)..................... -- 18,713
12b-1 fees (X Shares)................................... -- 22,455
Custodian and fund accounting fees...................... 143,989 139,429
Transfer agent fees..................................... 31,326 42,892
Legal fees.............................................. 23,926 43,746
Other expenses.......................................... 148,457 237,512
----------- -----------
Total Expenses........................................ 1,701,104 4,820,138
Less: Fee waivers....................................... -- (153,004)
Expenses paid by third parties.................... -- (6,975)
----------- -----------
Total Net Expenses....................................... 1,701,104 4,660,159
----------- -----------
NET INVESTMENT INCOME.................................... 13,859,405 24,332,592
REALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investment
transactions.......................................... (26,740) 26,388
----------- -----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......... $13,832,665 $24,358,980
=========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
31
<PAGE> 35
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT
TAX-EXEMPT MONEY FUND MONEY MARKET FUND
---------------------------------- -------------------------------------
YEAR ENDED YEAR ENDED
---------------------------------- -------------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income......... $ 13,859,405 $ 15,492,137 $ 24,332,592 $ 16,385,527
Net realized gains (losses) on
investment transactions..... (26,740) (26,497) 26,388 (20,587)
---------------- ---------------- ---------------- ----------------
Change in net assets resulting
from operations............... 13,832,665 15,465,640 24,358,980 16,364,940
---------------- ---------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Pacific Horizon Shares...... (1,704,176) (1,537,268) (14,425,062) (11,850,877)
Horizon Shares.............. (8,858,516) (12,434,866) -- --
Horizon Service Shares...... (3,296,713) (1,520,003) (9,708,150) (4,534,650)
X Shares.................... -- -- (199,380)(a) --
---------------- ---------------- ---------------- ----------------
Change in net assets from
shareholder distributions..... (13,859,405) (15,492,137) (24,332,592) (16,385,527)
---------------- ---------------- ---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued... 1,611,040,281 1,664,730,698 2,140,307,421 1,662,493,881
Dividends reinvested.......... 2,774,538 2,933,894 19,760,377 15,008,295
Cost of shares redeemed....... (1,481,260,268) (1,739,055,031) (1,897,767,756) (1,220,731,474)
---------------- ---------------- ---------------- ----------------
Change in net assets from
capital share transactions.... 132,554,551 (71,390,439) 262,300,042 456,770,702
---------------- ---------------- ---------------- ----------------
Change in net assets........... 132,527,811 (71,416,936) 262,326,430 456,750,115
NET ASSETS:
Beginning of year............. 387,005,766 458,422,702 731,395,560 274,645,445
---------------- ---------------- ---------------- ----------------
End of year................... $ 519,533,577 $ 387,005,766 $ 993,721,990 $ 731,395,560
================ ================ ================ ================
</TABLE>
- ---------------
(a) Period from October 2, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
32
<PAGE> 36
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 February 28, 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 three classes of shares (Pacific Horizon Shares,
Horizon Shares and Horizon Service Shares) and California Tax-Exempt Fund issues
three classes of shares (Pacific Horizon Shares, Horizon Service Shares, and
effective October 2, 1996, X 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 have a Distribution
and Services Plan.
The Tax-Exempt Fund seeks 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 Funds' investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, serves as the Funds' administrator.
Concord Financial Group, Inc. (the "Distributor"), an indirect, wholly-owned
subsidiary of BISYS, serves as the distributor of the Funds' shares. BISYS Fund
Services, Inc. ("BISYS Ohio"), also a wholly-owned subsidiary of BISYS, serves
as transfer and dividend disbursing agent of the Funds.
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.
33
<PAGE> 37
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 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
34
<PAGE> 38
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 REALIZED
NET INVESTMENT INCOME GAIN/(LOSS) ON 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
FUND CARRYOVER EXPIRATION 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, the California Tax-Exempt Fund utilized $32,982
of its available capital loss carryover to offset realized capital gains for
federal income tax purposes, 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 will elect to defer capital losses of
$6,594 after October 31, 1996.
35
<PAGE> 39
OTHER:
The California Tax-Exempt Fund maintains a cash balance with its custodian
and receives a reduction of its custody fees and expenses for the amount of
interest earned on such uninvested cash balances. For financial reporting
purposes for the year ended February 28, 1997, custodian fees and expenses paid
by third parties were increased by $6,975. 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 and 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 Organizations may include Bank of America, BISYS and its
affiliates. Under the Services Agreement and Services Plan, Bank of America and
BISYS waived $76,502 and $76,502, respectively, in special management fees for
the California Tax-Exempt Fund for the year ended February 28, 1997. For the
year ended February 28, 1997, the Funds were advised that
36
<PAGE> 40
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........................................................ $ 158,458 $ 5,303
California Tax-Exempt Fund............................................. 1,202,562 7,814
</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 year ended February 28, 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.................................................................. $ 274,174
California Tax-Exempt Fund....................................................... 760,334
</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 year ended February 28, 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............................................. $41,168
</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 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.
37
<PAGE> 41
BISYS Ohio serves the Funds as transfer agent and dividend disbursing agent.
In these capacities for the Funds, BISYS Ohio earned $31,326 and $42,892 from
the Tax-Exempt Fund and California Tax-Exempt Fund, respectively, for the year
ended February 28, 1997. For the period January 1, 1996 through December 31,
1996, BISYS Ohio agreed to voluntarily limit aggregate transfer agency fees.
Absent this voluntary limit the Funds would have incurred additional costs of
$7,642 and $11,004, respectively.
For the year ended February 28, 1997, the Tax-Exempt Fund and California
Tax-Exempt Fund incurred legal charges totaling $23,926 and $43,746
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 former President and Chairman of the Company received an additional $40,000
per year through February 28, 1997 in consideration for his years of service.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the 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 $5,110 and $3,650 for the Tax-Exempt Fund and California Tax-Exempt
Fund respectively, for the year ended February 28, 1997.
38
<PAGE> 42
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 February 28, 1997 (as a percentage of total
investments):
<TABLE>
<CAPTION>
CALIFORNIA
TAX-EXEMPT TAX-EXEMPT
FUND FUND
---------- ----------
<S> <C> <C>
Airport Facilities................................................ 1.6% 0.5%
Commercial Paper.................................................. 16.2 9.3
Education......................................................... 4.0 3.1
Electrical and Electronic Equipment............................... 1.0 --
General Obligations............................................... 11.2 1.7
Healthcare........................................................ 13.7 4.6
Home Building and Land Development................................ -- 1.7
Housing Developments.............................................. 7.6 17.7
Industrial Development Revenue.................................... 5.3 3.8
Leases............................................................ -- 2.5
Medical Care & Products........................................... 1.9 --
Miscellaneous..................................................... 0.5 0.6
Pollution Control................................................. 4.5 1.9
Power Projects.................................................... 4.3 0.3
Public Facilities................................................. -- 0.4
Resource Recovery Facilities...................................... -- 2.8
Revenue........................................................... 22.1 31.8
Sewer Projects.................................................... -- 2.2
Special Tax....................................................... -- 1.4
Solid Waste....................................................... 1.0 0.9
Transportation.................................................... -- 4.7
Turnpike, Road & Bridge Development............................... -- 1.3
Utilities......................................................... 3.2 4.7
Waste Management.................................................. -- 0.3
Water Projects.................................................... 1.9 1.8
------ ------
100.0% 100.0%
====== ======
</TABLE>
39
<PAGE> 43
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
--------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, 1997 FEBRUARY 29, 1996 FEBRUARY 28, 1997 FEBRUARY 29, 1996
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Pacific Horizon Shares
Issued.......................... 230,496,897 235,312,433 917,590,384 933,156,275
Reinvested...................... 1,545,273 1,213,275 13,790,272 10,635,100
Redeemed........................ (195,234,875) (224,352,700) (966,354,368) (602,410,729)
------------ ------------ ------------ ------------
Net increase (decrease).......... 36,807,295 12,173,008 (34,973,712) 341,380,646
============ ============ ============ ============
Horizon Shares
Issued.......................... 997,203,792 1,284,276,610 -- --
Reinvested...................... 135,161 517,254 --
Redeemed........................ (1,035,902,063) (1,363,886,192) -- --
------------ ------------ ------------ ------------
Net decrease..................... (38,563,110) (79,092,328) -- --
============ ============ ============ ============
Horizon Service Shares
Issued.......................... 383,339,592 145,141,655 1,184,396,760 729,337,606
Reinvested...................... 1,094,104 1,203,365 5,770,710 4,373,195
Redeemed........................ (250,123,330) (150,816,139) (921,990,855) (618,320,745)
------------ ------------ ------------ ------------
Net increase (decrease).......... 134,310,366 (4,471,119) 268,176,615 115,390,056
============ ============ ============ ============
X Shares (a)
Issued.......................... -- -- 38,320,277 --
Reinvested...................... -- -- 199,395 --
Redeemed........................ -- -- (9,422,533) --
------------ ------------ ------------ ------------
Net increase..................... -- -- 29,097,139 --
============ ============ ============ ============
</TABLE>
NOTE 7 -- FEDERAL INCOME TAX INFORMATION (UNAUDITED)
During the year ended February 28, 1997, the Funds declared tax-exempt
income distributions in the following amounts:
<TABLE>
<S> <C>
Tax-Exempt Fund..................................................................... $13,855,600
California Tax-Exempt Fund.......................................................... $24,332,592
<FN>
- ---------------
(a) Period from October 2, 1996 (inception date) to February 28, 1997.
</TABLE>
40
<PAGE> 44
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD
--------------------------------------- ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 29, 28, 28,
1997 1996 1995 1994(A)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income................................ 0.0290 0.0327 0.0253 0.0124
Less dividends from net investment income............. (0.0290) (0.0327) (0.0253) (0.0124)
-------- -------- -------- --------
Net change in net asset value per share............... -- -- -- --
-------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF YEAR................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total return.......................................... 2.94% 3.32% 2.56% 1.25%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)................... $ 86 $ 50 $ 37 $ 50
Ratio of expenses to average net assets.............. 0.60% 0.63% 0.60% 0.60%(c)
Ratio of net investment income to average net
assets............................................. 2.91% 3.26% 2.47% 1.95%(c)
Ratio of expenses to average net assets*............. (b) (b) (b) 0.61%(c)
Ratio of net investment income to average net
assets*............................................ (b) (b) (b) 1.94%(c)
<FN>
- ---------------
* 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.
</TABLE>
See Notes to Financial Statements.
41
<PAGE> 45
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 29, 28, 28, 28,
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income...................... 0.0322 0.0359 0.0285 0.0225 0.0269
Less dividends from net investment income... (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 YEAR...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return................................ 3.27% 3.65% 2.89% 2.27% 2.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)......... $ 264 $ 303 $ 382 $ 515 $ 384
Ratio of expenses to average net assets.... 0.28% 0.31% 0.28% 0.28% 0.28%
Ratio of net investment income to average
net assets............................... 3.22% 3.58% 2.81% 2.25% 2.69%
Ratio of expenses to average net assets*... (a) (a) (a) 0.29% (a)
Ratio of net investment income to average
net assets*.............................. (a) (a) (a) 2.24% (a)
<FN>
- ---------------
* 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.
</TABLE>
See Notes to Financial Statements.
42
<PAGE> 46
PACIFIC HORIZON TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 29, 28, 28, 28,
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income...................... 0.0297 0.0334 0.0260 0.0200 0.0244
Less dividends from net investment income... (0.0297) (0.0334) (0.0260) (0.0200) (0.0244)
-------- -------- -------- -------- --------
Net change in net asset value per........... -- -- -- -- --
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF YEAR...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return................................ 3.01% 3.39% 2.63% 2.02% 2.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)......... $ 169 $ 35 $ 39 $ 48 $ 50
Ratio of expenses to average net assets.... 0.53% 0.56% 0.53% 0.53% 0.53%
Ratio of net investment income to average
net assets............................... 2.98% 3.34% 2.57% 2.04% 2.42%
Ratio of expenses to average net
assets*.................................. (a) (a) (a) 0.57% (a)
Ratio of net investment income to average
net assets*.............................. (a) (a) (a) 2.00% (a)
<FN>
- ---------------
* 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.
</TABLE>
See Notes to Financial Statements.
43
<PAGE> 47
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 29, 28, 28, 28,
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income...................... 0.0284 0.0324 0.0249 0.0186 0.0224
Net realized gains/(losses) investment
transactions............................. -- (0.0001) (0.0001) 0.0002 (0.0002)
-------- -------- -------- -------- --------
Total income from investment operations..... 0.0284 0.0323 0.0248 0.0188 0.0222
Less dividends to shareholders from net
investment income.......................... (0.0284) $(0.0324) $ (0.024) $(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 YEAR...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return................................ 2.88% 3.29% 2.52% 1.88% 2.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)......... $ 493 $ 528 $ 187 $ 204 $ 128
Ratio of expenses to average net assets.... 0.57% 0.62% 0.62% 0.66% 0.66%
Ratio of net investment income to average
net assets............................... 2.83% 3.35% 2.48% 1.86% 2.21%
Ratio of expenses to average net assets*... .60%** 0.63%** (a) 0.68% 0.74%
Ratio of net investment income to average
net assets*.............................. 2.80% (b) (a) 1.84% 2.13%
<FN>
- ---------------
* 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.
</TABLE>
See Notes to Financial Statements.
44
<PAGE> 48
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 29, 28, 28,
1997 1996 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income................................ 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............... 0.0291 0.0332 0.0255 0.0197
Less dividends to shareholders from net investment
income............................................... (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 YEAR................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total return.......................................... 2.95% 3.36% 2.59% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)................... $ 472 $ 203 $ 88 $ 124
Ratio of expenses to average net assets.............. 0.50% 0.55% 0.55% 0.53%
Ratio of net investment income to average net
assets............................................. 2.92% 3.43% 2.50% 1.98%
Ratio of expenses to average net assets*............. (b) 0.55%** (a) 0.60%
Ratio of net investment income to average net
assets*............................................ (b) 3.42% (a) 1.91%
<FN>
- ---------------
* 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.
</TABLE>
See Notes to Financial Statements.
45
<PAGE> 49
PACIFIC HORIZON CALIFORNIA TAX-EXEMPT
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
FEBRUARY
28,
1997(A)
---------
<S> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD...................... $ 1.00
--------
Income from Investment Operations:
Net investment income............................................. .0107
Less dividends to shareholders from net investment income........... (.0107)
--------
Net change in net asset value per share............................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD............................ $ 1.00
========
Total return........................................................ 1.09%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)................................ $ 29
Ratio of expenses to average net assets........................... 0.80%(c)
Ratio of net investment income to average net assets.............. 2.66%(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 October 2, 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.
46
<PAGE> 50
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors
and Shareholders of
Pacific Horizon Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Pacific Horizon Tax-Exempt Money
Fund and Pacific Horizon California Tax-Exempt Money Market Fund (two of the
portfolios constituting the Pacific Horizon Funds, Inc., hereafter referred to
as the "Funds") at February 28, 1997, the results of each of their operations
for the year then ended, the changes in each of their net assets for each of the
two years in the period then ended and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
February 28, 1997 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
April 21, 1997
47
<PAGE> 51
IST-0032 4/97 --------------
Bulk Rate
U.S. Postage
PAID
Cleveland, OH
Permit No. 1
--------------
