ANNUAL REPORT
- --------------------------------------------------------------------------------
New Horizions Fund
- --------------------------------------------------------------------------------
December 31, 1996
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Report Highlights
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* The stock market surged to another double-digit gain in 1996, although
small companies lagged their larger counterparts.
* The New Horizons Fund returned 3.68% and 17.03% for the 6- and 12-month
periods ended December 31, respectively. The fund outperformed its small
company peers in both periods but trailed large-company benchmarks.
* Over the last six months, the fund got good performance from energy,
financial, and technology holdings. Our largest positions remained in
business services and technology, and we began boosting health care
exposure.
* The stock market should advance at a slower pace in 1997, and small
companies should regain leadership due to their more attractive valuations
relative to large companies.
<PAGE>
Fellow Shareholders
- --------------------------------------------------------------------------------
After a brief midyear correction, the resilient stock market burst ahead in
the second half of 1996 to finish the year with another double-digit gain.
Rising long-term interest rates failed to stop the market rally. Both large- and
small-company market indices ended the year at or very near all-time highs,
although small companies significantly lagged their larger counterparts over the
past six months.
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/96 ....................... 6 Months 12 Months
- --------------------------------------------------------------------------------
New Horizons Fund ............................ 3.68% 17.03%
S&P 500 ...................................... 11.68 22.96
Nasdaq Composite * ........................... 8.95 22.71
Lipper Small Company
Growth Fund Index ............................ 0.38 14.51
- --------------------------------------------------------------------------------
* Principal only
The New Horizons Fund rose modestly in the second half, trailing the
large-company, unmanaged Standard & Poor's 500 Index but outperforming the
Lipper Small Company Growth Fund Index. For the full year, your fund gained a
robust 17%, exceeding its peer group but lagging the technology-laden Nasdaq and
the S&P 500 due to the weak performance of small-cap stocks in the second half.
YEAR-END DISTRIBUTION
The fund's Directors declared a capital gain distribution of $2.19 per
share, consisting of a short-term gain of $0.56 and a long-term gain of $1.63.
This distribution was paid on December 30 to shareholders of record on December
26. In early January, we mailed your statement reflecting this distribution, and
Form 1099-DIV, reporting this payment for tax purposes, was mailed later in the
month.
<PAGE>
MARKET ENVIRONMENT
Analmost ideal economic climate fueled the market's advance in 1996. The
economy continued to grow at a moderate, noninflationary pace, capping its sixth
consecutive year of growth. There has now been only one recession in the last 14
years, the first time that has happened since records started being kept just
before the Civil War. Corporate profit growth remained strong, with the average
company increasing its earnings by slightly more than 10%, which is unusual this
late in the economic cycle. Strong earnings helped stocks maintain their
attractiveness despite a rise in long-term bond yields of about one percentage
point through August.
==============================
Stock market suppLy and demand
factors remained very
favorable . . .
- ------------------------------
The November elections proved anticlimatic because Clinton's victory was
forecast early in the year and the Republicans maintained their control of
Congress. The stock market's strong advance late in the year indicated
investors' approval of the Washington status quo, in which neither party is
powerful enough to institute radical changes to the business and social climate.
Stock market supply and demand factors remained very favorable and were a
key contributor to the market's outstanding results. Net cash flows into
domestic stock mutual funds broke all records, helping sustain strong demand for
equities. While much of this demand was offset by a record supply of new equity
offerings by corporations, heightened merger activity and corporate share
repurchases took a significant supply of shares out of the market, leading to a
high level of net demand for stocks.
Small-company stocks led the market in the first five months of 1996 as
signs of speculation surfaced - extremely high valuations in some sectors, a
frothy market for initial public offerings, and huge inflows into the most
aggressive mutual funds. The market endured a sharp but swift correction in June
and early July that hit small-company stocks the hardest. Afterward, as the
market recovered to reach record levels in the fourth quarter, most small stocks
struggled to reach their previous peaks, while a very narrow list of large, blue
chip companies led the market's surge. The S&P 500 rose just over 20% for the
year (excluding dividends), but the median company in the index rose only 15%.
In the S&P Small Cap 600 Index, the median price increase in 1996 was just 13%.
PORTFOLIO REVIEW
The two best-performing sectors of the portfolio for both the second half
and full year, energy and financials, are somewhat nontraditional areas of
investment for most small-cap growth funds. Relatively few of these companies
can clear our growth hurdle because they lack the potential to increase their
earnings at least 20% annually over a period of three to five years.
<PAGE>
In the energy sector, a sustained rise in the price of oil and gas led to
strong gains for both producers and service companies in the second half. Cooper
Cameron, an energy service company spun off from Cooper Industries, doubled in
price during 1996 and was one of the fund's best performers for both the past
six and 12 months (as shown in the table following this letter). Other strong
energy stocks were BJ Services, Camco International, and Smith International.
Among financial stocks, consumer lender Money Store and insurers CMAC Investment
and UICI led the way as these stocks continued to reap the benefit of a strong
economy, relatively low interest rates, and strong financial markets.
================================================================================
Sector Diversification
- --------------------------------------------------------------------------------
12/31/95 6/30/96 12/31/96
- --------------------------------------------------------------------------------
Financial 5% 5% 6%
Health Care 16 16 17
Consumer 19 14 15
Technology 24 19 22
Business Services 27 28 28
Energy 3 3 5
Industrial 4 4 5
Miscellaneous -- 1 --
Reserves 2 10 2
- --------------------------------------------------------------------------------
Total 100% 100% 100%
================================================================================
Technology stocks were our worst performers in the first half of the year
but rebounded to rank among the best stocks in the second half. While eight of
the 10 worst contributors to fund performance in the first half were technology
companies, seven of the 10 best contributors in the second half were technology
issues, led by Maxim Integrated Products and 3Com.
However, our worst performer over the past six months was also a technology
company, Shiva, which experienced an unanticipated product transition problem at
midyear. For the full year, Intuit, maker of the popular Quicken personal
finance software program, was our worst stock due to overly optimistic estimates
of software sales and higher-than-expected costs in developing its home banking
business.
As usual, we gradually shifted our exposure among industry sectors, with
business services and technology remaining our largest concentrations, as shown
on page 3. During the year, we maintained our long-term strategy of building
exposure to business services and started boosting our health care positions
after several years of reductions. Consumer holdings were pared for the fifth
straight year.
<PAGE>
==============================
During the year, we . . .
started boosting health care
positions . . .
- ------------------------------
We traded around our technology positions, trying to take advantage of the
volatility in these stocks, ending the year with slightly lower exposure. Our
cash reserves, normally under 5%, fluctuated more than usual, reflecting the
sharp surge of cash flows into the fund in the second quarter before it was
closed to new investors in June. At this point, we intend to keep the fund
closed until we are assured that additional inflows can be readily accommodated
and are in the best interests of existing shareholders.
OUTLOOK
We were certainly surprised by the magnitude of the stock market's advance
in 1996 as well as its resiliency after the midyear correction. Yet, as noted
earlier, economic conditions, corporate profits, and supply and demand were
consistently favorable. As 1997 dawns, all of these market forces remain
positive. Economic growth is moderate, profits are strong, and inflation remains
low and under control. Interest rates have risen somewhat from their lows but
are not high enough to choke off the economy. Major changes out of Washington
seem unlikely. Cash flows into equity mutual funds have recently picked up
again, lending additional support to the market.
We expect stocks to rise moderately in 1997, although well below the
extraordinary gains of the past two years. We feel even better about the
prospects for small companies. Due to the underperformance of small-caps in the
second half, their valuations have become more attractive relative to large
companies. The New Horizons Fund's relative price/earnings ratio fell from 1.58
at midyear and 1.60 at the end of the third quarter to 1.52 at year-end, near
the middle of its historical range of one to two times the S&P 500's P/E.
Although small companies have generally underperformed for the past two years,
we are hopeful that their more attractive relative valuations will garner
greater investor attention in 1997. Over the longer term, we are optimistic
about the potential for small companies and the New Horizons Fund to achieve
above-average returns. Thank you for your continued support.
Respectfully submitted,
[Signature]
John H. Laporte
President and Chairman of the Investment Advisory Committee
January 20, 1997
<PAGE>
[New Horizions Fund P/E Ratio Chart Shown Here]
[New Horizions Fund P/E Relative to the S&P 500 P/E Chart Shown Here]
================================================================================
Sticking To Your Game Plan
- --------------------------------------------------------------------------------
[An 8-bar chart showing best and worst annualized total returns of stocks
for various rolling time periods between 1950 and 1996]
In our report to you one year ago, we mentioned the possibility of a modest
decline in stock prices. In fact, from May to July 1996, the broad market (as
measured by the Standard & Poor's 500 Stock Index) fell around 7%. However, the
bull market resumed its charge to post a robust 23% gain for the year.
Some believe the market is poised for a significant downturn. We do not
expect a major drop in stock prices in 1997, although another modest pullback is
possible. On balance, we expect stocks to advance at a much slower pace.
<PAGE>
How should you prepare for a potential market pullback? As always, our
advice is to diversify your investments and focus on the long term. If you've
implemented a sound investment strategy, stay the course. Stocks have
historically overcome periods of volatility to provide better returns than most
other investments. Market corrections can even have a silver lining because they
result in good buying opportunities.
Furthermore, the volatility of stock market returns has diminished
significantly over longer time frames. The chart shows the best and worst
annualized returns on stocks over various rolling time periods between 1950 and
1996. (For instance, there were 37 rolling 10-year periods: 1950-1960,
1951-1961, etc.) Investors who held stocks for only one year could have had as
much as a 52.6% gain, or as little as a 26.5% loss -- a spread of 79 percentage
points. However, investors who held stocks for 10-year periods or longer always
overcame interim volatility to post gains for the entire period.
In addition, a well-diversified portfolio can weather volatility better than a
more concentrated portfolio over the long term and particularly during market
corrections. For example, during last summer's correction, small-company stocks
fell nearly 16% while large-company issues dropped 7.3%. However, a portfolio
diversified among large U.S. companies (30% of assets), small U.S. companies
(15%), foreign companies (15%), intermediate-term Treasury bonds (30%), and
Treasury bills (10%) would have lost a smaller 5.2% of its value. {1}
Above all, remember that investing is a long-distance race, not a
sprint.
- --------------------------------------------------------------------------------
{1} Ned Davis Research.
================================================================================
<PAGE>
Portfolio Highlights
================================================================================
TWENTY-FIVE LARGEST HOLDINGS
- --------------------------------------------------------------------------------
Percent of
Net Assets
12/31/96
- --------------------------------------------------------------------------------
Paychex 2.2%
CUC International 1.6
Maxim Integrated Products 1.6
HFS 1.5
BMC Software 1.5
- --------------------------------------------------------------------------------
3Com 1.3
Boston Chicken 1.2
Cooper Cameron 1.1
OEA 1.0
Linear Technology 1.0
- --------------------------------------------------------------------------------
SunGard Data Systems 1.0
Corporate Express 1.0
Analog Devices 1.0
Catalina Marketing 1.0
Quorum Health Group 1.0
- --------------------------------------------------------------------------------
Outback Steakhouse 0.9
Omnicare 0.9
Republic Industries 0.9
Synopsys 0.9
Xilinx 0.8
- --------------------------------------------------------------------------------
Weatherford Enterra 0.8
PennCorp Financial Group 0.8
USA Waste Services 0.8
Dentsply International 0.8
General Nutrition 0.8
- --------------------------------------------------------------------------------
Total 27.4%
================================================================================
<PAGE>
================================================================================
Portfolio Highlights
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
6 Months Ended 12/31/96
Ten Best Contributors
- --------------------------------------------------------------------------------
Maxim Integrated Products 15cents
Cooper Cameron 12
3Com 12
Altera 8
Linear Technology 8
BMC Software 8
Biogen 6
Analog Devices 6
Jones Apparel Group 5
VERITAS Software 5
- --------------------------------------------------------------------------------
Total 85cents
Ten Worst Contributors
- --------------------------------------------------------------------------------
Shiva -12cents
Apria Healthcare 8
Glenayre Technologies 8
Paging Network 8
Intuit 8
HFS 6
Corporate Express 6
MobileMedia ** 6
Olsten ** 6
Alliance Entertainment ** 5
- --------------------------------------------------------------------------------
Total -73cents
<PAGE>
12 Months Ended 12/31/96
Ten Best Contributors
- --------------------------------------------------------------------------------
Paychex 25cents
BMC Software 15
Cooper Cameron 15
Career Horizons ** 13
3Com 13
HFS 13
PeopleSoft 12
Catalina Marketing 11
Apollo Group 10
Republic Industries 10
- --------------------------------------------------------------------------------
Total 137cents
Ten Worst Contributors
- --------------------------------------------------------------------------------
Intuit -23cents
Adobe Systems 14
MobileMedia ** 12
Broderbund Software 9
Micro Warehouse 9
Sybase ** 9
Viacom ** 9
Paging Network 8
Alliance Entertainment ** 8
Glenayre Technologies 7
- --------------------------------------------------------------------------------
Total -108cents
* Position added
** Position eliminated
================================================================================
<PAGE>
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[New Horizions Fund SEC Chart Shown Here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Periods Ended 12/31/96 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
New Horizons Fund 17.03% 22.20% 19.74% 16.29%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
<TABLE>
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year
Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
Beginning of period ..................... $ 20.50 $ 14.76 $ 16.16 $ 15.53 $ 15.68
Investment activities
Net investment income ............... (0.08) (0.04) (0.07) (0.07) (0.04)
Net realized and
unrealized gain (loss) .............. 3.54 8.19 0.10 3.40 1.65
Total from
investment activities ............... 3.46 8.15 0.03 3.33 1.61
Distributions
Net realized gain ................... (2.19) (2.41) (1.43) (2.70) (1.76)
NET ASSET VALUE
End of period ........................... $ 21.77 $ 20.50 $ 14.76 $ 16.16 $ 15.53
Ratios/Supplemental Data
Total return ............................ 17.03% 55.44% 0.30% 22.01% 10.58%
Ratio of expenses to
average net assets ...................... 0.90% 0.90% 0.93% 0.93% 0.93%
Ratio of net investment
income to average
net assets .............................. (0.41)% (0.23)% (0.50)% (0.50)% (0.32)%
Portfolio turnover rate ................. 41.4% 55.9% 44.3% 49.4% 49.6%
Average commission
rate paid ............................... $ 0.1681 -- -- -- --
Net assets, end of period
(in millions) ........................... $ 4,363 $ 2,855 $ 1,648 $ 1,628 $ 1,547
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
Portfolio of Investments
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
- --------------------------------------------------------------------------------
Equity Investments ** 98.5%
FINANCIAL 5.8%
Insurance 3.2%
CMAC Investment ..................................... 570,000 $ 20,947
MAIC Holdings * ..................................... 219,850 7,447
Mutual Risk Management .............................. 860,000 31,820
PennCorp Financial Group ............................ 1,000,000 36,000
Presidential Life ................................... 977,200 11,849
PXRE ................................................ 368,000 9,108
UICI * .............................................. 754,500 24,380
141,551
Financial Services 2.6%
1st Investors Financial *+ .......................... 400,000 3,025
Aames Financial ..................................... 431,800 15,491
Consumer Portfolio Services * ....................... 656,700 7,347
Delta Financial * ................................... 150,000 2,700
First Alliance * .................................... 150,000 4,481
ITG * ............................................... 450,000 8,550
Legg Mason .......................................... 275,000 10,588
Mercury Finance ..................................... 1,331,400 16,310
Money Store ......................................... 1,187,500 32,953
Oxford Resources (Class A) * ........................ 300,000 9,206
World Acceptance * .................................. 400,000 2,650
113,301
Total Financial ..................................... 254,852
HEALTH CARE 16.3%
Pharmaceuticals 0.8%
Genta *++ ........................................... 129,310 46
Genta, Series A, Cv. Pfd. *++ ....................... 50,000 125
Genta, warrants, 10/28/98 *++ ....................... 50,000 0
Immulogic Pharmaceuticals * ......................... 1,000,000 6,563
Incyte Pharmaceuticals * ............................ 308,000 15,785
Inhale Therapeutic Systems * ........................ 226,300 3,451
Magainin Pharmaceuticals * .......................... 444,600 4,201
Magainin Pharmaceuticals, warrants, 8/6/01 *++ ...... 337,299 0
Magainin Pharmaceuticals *++ ........................ 518,921 4,379
34,550
<PAGE>
Biotechnology 4.9%
Biogen * ........................................ 600,000 $ 23,175
Cambridge Neuroscience *++ ...................... 150,000 1,586
Cell Genesys * .................................. 275,000 2,492
Cephalon * ...................................... 300,000 6,094
COR Therapeutics * .............................. 685,600 6,813
Corvas International *+ ......................... 900,000 4,950
Creative Biomolecules * ......................... 150,000 1,519
Cytel * ......................................... 390,000 1,316
CytoTherapeutics * .............................. 356,700 3,210
Diacrin, warrants, 12/31/00 * ................... 60,000 131
Ergo Science * .................................. 290,000 3,752
GeneMedicine * .................................. 300,000 1,678
Gilead Sciences * ............................... 500,000 12,469
Gliatech * ...................................... 230,000 1,783
Guilford Pharmaceuticals *+ ..................... 700,500 15,936
Human Genome Sciences * ......................... 100,000 4,063
IBAH, Series A, Cv. Pfd. *++ .................... 214,190 3,653
IBAH, warrants, 8/9/00 *++ ...................... 642,570 2,378
IDEXX Laboratories * ............................ 350,000 12,644
Imclone Systems * ............................... 162,200 1,571
Intercardia * ................................... 100,000 2,100
Isis Pharmaceuticals * .......................... 500,000 8,938
Ligand Pharmaceuticals * ........................ 417,500 6,236
MedImmune * ..................................... 257,000 4,433
NaPro BioTherapeutics *+ ........................ 700,000 7,438
NPS Pharmaceuticals *+ .......................... 900,000 9,956
Oncogene Science * .............................. 687,500 4,254
PathoGenesis * .................................. 600,000 12,900
Pharmacopeia * .................................. 400,000 7,700
Protein Design Labs * ........................... 93,200 3,379
SangStat Medical * .............................. 400,000 10,550
Sequus Pharmaceuticals * ........................ 300,000 4,781
Synaptic Pharmaceutical *+ ...................... 400,000 4,950
T Cell Sciences * ............................... 200,000 325
Targeted Genetics * ............................. 535,000 2,374
Targeted Genetics, warrants, 7/31/97 * .......... 135,000 1
Triangle Pharmaceuticals * ...................... 250,000 5,656
Xenova Group (GBP) *+ ........................... 517,500 1,862
Xenova Group ADR *+ ............................. 1,170,000 $ 3,729
212,775
Medical Equipment 1.0%
Cholestech * .................................. 480,000 2,670
Dentsply International ........................ 742,100 35,296
Nellcor * ..................................... 100,000 2,175
VISX * ........................................ 145,100 3,238
43,379
<PAGE>
Medical Instruments and Devices 3.3%
Arrow International ........................... 645,000 18,302
Cardiometrics * ............................... 200,000 1,069
Cyberonics * .................................. 103,600 350
Diagnostic Products ........................... 320,000 8,280
Haemonetics * ................................. 400,000 7,550
Imagyn Medical * .............................. 260,000 2,031
Incontrol * ................................... 400,000 3,150
Minntech ...................................... 217,000 2,536
Novoste *+ .................................... 421,000 5,657
R. P. Scherer * ............................... 350,000 17,587
ResMed * ...................................... 287,500 6,469
ReSound *++ ................................... 893,023 5,677
Steris * ...................................... 200,000 8,712
Stryker ....................................... 500,000 14,969
Sybron International * ........................ 900,000 29,700
Tecnol Medical Products * ..................... 200,000 2,988
Thermolase * .................................. 31,000 488
Utah Medical Products * ....................... 400,000 5,350
Vital Signs ................................... 178,900 4,663
145,528
Health Care Services 6.3%
Access Health Marketing * ................... 100,000 4,500
AMISYS Managed Care Systems * ............... 190,000 3,182
Apria Healthcare * .......................... 1,367,000 25,631
Capstone Pharmacy Services * ................ 300,000 3,375
Carematrix * ................................ 400,000 5,250
EmCare Holdings * ........................... 150,000 3,441
Harborside Healthcare * ..................... 342,200 4,064
Health Management (Class A) * ............... 337,500 7,594
HealthSouth * ............................... 550,000 21,244
Inphynet Medical Management * ............... 580,900 10,238
NCS HealthCare * ............................ 55,500 $ 1,609
NeoPath * ................................... 500,000 9,187
OccuSystems * ............................... 600,000 16,125
Omnicare .................................... 1,277,131 41,028
Physicians Health Service * ................. 93,200 1,398
Quorum Health Group * ....................... 1,400,000 41,475
Raytel Medical *+ ........................... 470,000 4,935
Renal Care Group *+ ......................... 750,000 23,953
Summit Medical Systems * .................... 100,000 744
Sunrise Assisted Living * ................... 250,000 6,969
Synetic * ................................... 112,700 5,459
Total Renal Care * .......................... 300,000 10,875
United Dental Care *+ ....................... 672,500 20,553
272,829
Total Health Care ........................... 709,061
<PAGE>
CONSUMER 15.2%
Soft Goods Retailers 1.0%
AnnTaylor Stores * .......................... 1,052,900 18,426
Gymboree * .................................. 413,400 9,405
Jos. A. Bank Clothiers * .................... 200,000 875
Urban Outfitters *+ ......................... 946,000 12,475
41,181
Hard Goods Retailers 2.6%
Brookstone * ................................ 279,900 2,921
Discount Auto Parts *+ ...................... 1,000,000 23,375
Dominicks Supermarkets * .................... 300,000 6,525
General Nutrition * ......................... 2,000,000 34,000
Little Switzerland *+ ....................... 431,100 1,994
Micro Warehouse * ........................... 500,000 5,813
PETsMART * .................................. 1,014,800 22,199
Sunglass Hut International * ................ 200,000 1,463
TSC *+ ...................................... 675,900 13,940
112,230
Consumer Durables 0.1%
GT Bicycles * ............................... 475,000 6,056
6,056
Consumer Nondurables 2.9%
American Pad & Paper * ....................... 1,000,000 22,625
ERO * ........................................ 281,300 2,426
Jones Apparel Group * ........................ 800,000 29,900
Linens `n Things * ........................... 407,000 7,988
Nautica Enterprises * ........................ 800,000 20,100
Norton McNaughton * .......................... 300,000 2,513
Norwood Promotional Products *+ .............. 300,000 5,325
Perrigo * .................................... 1,000,000 9,000
Quiksilver * ................................. 163,400 3,513
Rival ........................................ 187,000 4,593
Score Board *+ ............................... 700,000 1,400
Tommy Hilfiger * ............................. 300,000 14,400
WestPoint Stevens * .......................... 123,600 3,677
127,460
Restaurants 3.1%
Boston Chicken * .............................. 1,500,000 53,812
Einstein/Noah Bagel * ......................... 161,000 4,780
Lone Star Steakhouse & Saloon * ............... 900,000 24,131
Outback Steakhouse * .......................... 1,550,000 41,269
Quality Dining * .............................. 400,000 7,050
Schlotzsky's *+ ............................... 320,000 3,120
Silver Diner *+++ ............................. 750,000 2,510
136,672
<PAGE>
Entertainment 1.6%
Bristol Hotel * ............................... 252,100 8,004
Carmike Cinemas (Class A) * ................... 371,924 9,438
CINAR Films (Class B) * ....................... 106,850 2,732
Dover Downs Entertainment * ................... 150,000 2,681
Extended Stay America * ....................... 914,000 18,394
Interstate Hotels * ........................... 135,300 3,822
Penske Motorsports * .......................... 250,000 6,375
Platinum Entertainment * ...................... 250,000 1,906
Speedway Motorsports * ........................ 250,000 5,250
Spice Entertainment *+ ........................ 650,000 1,056
Studio Plus Hotels * .......................... 570,400 9,055
68,713
Consumer Services 3.9%
Ambassadors International *+ ..................... 433,000 4,114
America Online * ................................. 500,000 16,625
Apollo Group * ................................... 1,000,000 33,438
CUC International * .............................. 3,000,000 71,250
Equity Corp International * ...................... 218,250 $ 4,283
Golden Books Financing Trust, Cv. Pfd. ........... 70,000 3,980
Sylvan Learning Systems * ........................ 1,160,400 32,781
TRM Copy Centers *+ .............................. 425,000 4,223
170,694
Total Consumer ................................... 663,006
TECHNOLOGY 21.6%
Computer Hardware 0.5%
Security Dynamics Technologies * .............. 400,000 12,575
Silicon Graphics * ............................ 300,000 7,650
20,225
Computer Software 10.4%
Adobe Systems ................................. 600,000 22,462
BMC Software * ................................ 1,528,000 63,507
Broderbund Software * ......................... 200,000 5,938
Cadence Design Systems * ...................... 400,000 15,900
CBT Group PLC ADR * ........................... 214,000 11,583
Cerner * ...................................... 478,600 7,358
Citrix Systems * .............................. 250,000 9,766
Cognos * ...................................... 402,200 11,262
Documentum * .................................. 400,000 13,650
E*TRADE * ..................................... 600,000 6,825
Electronic Arts * ............................. 200,000 5,988
EPIC * ........................................ 500,000 12,500
Expert Software * ............................. 128,100 440
<PAGE>
Informix * .................................... 500,000 10,219
INSO * ........................................ 300,000 11,812
Intuit * ...................................... 800,000 25,400
Macromedia * .................................. 100,000 1,813
OpenVision Technologies * ..................... 600,000 6,938
Oracle * ...................................... 714,000 29,765
PeopleSoft * .................................. 700,000 33,556
PLATINUM technology * ......................... 1,800,000 24,412
Premenos Technology * ......................... 500,000 4,250
Puma Technology * ............................. 250,000 4,250
Pure Atria * .................................. 500,000 12,281
Remedy * ...................................... 200,000 10,700
SELECT Software Tools ADR * ................... 250,000 4,453
Sterling Software ............................. 250,000 7,906
Synopsys * .................................... 850,000 39,100
Vantive * ..................................... 397,900 12,385
VERITAS Software * ............................ 383,000 18,958
Verity * ...................................... 100,000 1,525
Viasoft * ..................................... 100,000 4,738
Worldtalk Communications * .................... 255,000 1,849
453,489
Peripherals 0.1%
Molex ......................................... 62,500 2,445
2,445
Networking and Telecom Equipment 5.0%
3Com * ........................................ 750,000 54,984
Ascend Communications * ....................... 450,000 27,956
Cascade Communications * ...................... 250,000 13,813
CIDCO * ....................................... 400,000 6,950
Cisco Systems * ............................... 142,000 9,044
FORE Systems * ................................ 750,000 24,703
Glenayre Technologies * ....................... 500,000 10,781
KVH Industries * .............................. 100,000 738
Level One * ................................... 330,000 11,715
Network General * ............................. 630,000 19,018
Shiva * ....................................... 699,600 24,311
Sync Research * ............................... 561,500 7,615
Telco Systems * ............................... 412,500 7,915
219,543
<PAGE>
Semiconductors 5.6%
Adaptec * ..................................... 344,000 13,782
Altera * ...................................... 300,000 21,806
Analog Devices * .............................. 1,250,000 42,344
Lattice Semiconductor * ....................... 250,000 11,469
Linear Technology ............................. 1,000,000 43,875
Maxim Integrated Products * ................... 1,600,000 69,300
SIPEX * ....................................... 200,000 6,425
Xilinx * ...................................... 1,000,000 36,812
245,813
Total Technology .............................. 941,515
BUSINESS SERVICES 27.5%
Telecom Services 2.4%
Arch Communications * ............................ 410,447 3,797
Cellular Communications International * .......... 300,000 8,625
Centennial Cellular (Class A) * .................. 500,000 6,031
Intercel * ....................................... 500,000 6,063
International CableTel * ......................... 266,666 6,683
Metromedia International * ....................... 1,265,700 12,499
Millicom International Cellular * ................ 150,000 4,810
Paging Network * ................................. 1,713,600 26,240
Palmer Wireless * ................................ 500,000 5,281
ProNet * ......................................... 500,000 2,156
SmarTalk TeleServices * .......................... 350,000 6,081
Vanguard Cellular * .............................. 845,000 13,203
Verilink * ....................................... 122,000 3,980
105,449
Computer Services 6.6%
Acxiom * .......................................... 500,000 11,938
BDM International * ............................... 180,600 9,730
BISYS Group * ..................................... 600,000 22,237
Concord EFS * ..................................... 1,076,600 30,145
FIserv * .......................................... 410,400 15,159
Harbinger * ....................................... 308,000 8,008
Health Management Systems * ....................... 144,700 1,999
National Data ..................................... 716,000 31,146
Paychex ........................................... 1,875,000 96,445
Sterling Commerce * ............................... 450,000 15,863
SunGard Data Systems * ............................ 1,100,000 43,862
286,532
Transportation 0.6%
Coach USA * ....................................... 300,000 8,813
Landstar Systems *+ ............................... 771,000 17,733
26,546
<PAGE>
Media and Advertising 3.8%
ADVO .............................................. 1,125,000 15,750
American Radio Systems (Class A) * ................ 300,000 8,175
Catalina Marketing * .............................. 764,000 42,115
Clear Channel Communications * .................... 200,000 7,225
Getty Communications ADR * ........................ 700,000 10,325
Jacor Communications * ............................ 300,000 8,231
Lamar Advertising * ............................... 206,000 4,892
Metro Networks * .................................. 397,200 9,980
Metromail * ....................................... 400,000 7,300
Outdoor Systems * ................................. 427,500 12,130
Pegasus Communications * .......................... 283,000 3,820
People's Choice TV * .............................. 280,000 1,689
Renaissance Communications * ...................... 500,000 17,875
Scandinavian Broadcasting System * ................ 300,000 5,119
United International Holdings (Class A) * ......... 425,000 5,127
Universal Outdoor Holdings * ...................... 114,000 2,651
Wireless One * .................................... 200,000 1,350
163,754
Environmental 3.0%
Continental Waste Industries * .................. 700,000 16,319
Philip Environmental * .......................... 1,250,000 18,125
Republic Industries * ........................... 1,300,000 40,544
Superior Services * ............................. 677,000 13,709
United Waste Systems * .......................... 240,000 8,235
USA Waste Services * ............................ 1,107,380 35,297
132,229
Engineering and Construction 0.3%
Insituform Technologies (Class A) * ............. 1,087,125 8,153
Toll Brothers * ................................. 250,000 4,875
13,028
Miscellaneous Business Services 5.7%
AccuStaff * .................................... 1,433,304 30,279
Alternative Resources * ........................ 305,900 5,258
APACHE Medical Systems * ....................... 160,000 1,690
Copart *+ ...................................... 791,600 10,291
Employee Solutions * ........................... 250,000 5,125
HFS * .......................................... 1,100,000 65,725
International Imaging Materials * .............. 200,000 4,450
LanVision Systems * ............................ 222,000 1,623
Medic Computer Systems * ....................... 412,300 16,621
META Group *+ .................................. 336,000 8,904
Orthodontic Centers of America * ............... 1,750,000 27,562
<PAGE>
Physician Reliance Network * ................... 1,000,000 7,687
Red Roof Inns * ................................ 354,500 5,495
Rexel * ........................................ 120,000 1,905
Romac International * .......................... 100,000 2,188
SITEL * ........................................ 466,200 6,585
Source Services * .............................. 400,000 7,175
SRS Labs * ..................................... 230,000 2,027
Staffing Resources *++ ......................... 200,000 2,720
Stericycle * ................................... 425,000 4,781
Trident International * ........................ 135,000 2,160
Viking Office Products * ....................... 400,000 10,675
Wackenhut Corrections * ........................ 260,000 5,200
West TeleServices * ............................ 82,000 1,845
Whittman-Hart * ................................ 302,000 7,663
WorldCorp *+ ................................... 890,000 3,894
249,528
Distribution 5.1%
BT Office Products International * ............. 500,000 4,437
Corporate Express * ............................ 1,450,000 42,684
Fisher Scientific .............................. 309,800 14,599
Henry Schein * ................................. 250,000 8,578
Jaco Electronics *+ ............................ 350,000 3,063
JP Foodservice *+ .............................. 1,200,000 33,450
MSC * .......................................... 505,000 18,685
Patterson Dental * ............................. 600,000 16,875
Richfood Holdings .............................. 999,300 24,233
Strategic Distribution *+ ...................... 1,761,000 14,088
Tech Data * .................................... 400,000 10,950
Watsco (Class A) ............................... 1,065,300 30,761
222,403
Total Business Services ........................ 1,199,469
ENERGY 4.7%
Exploration and Production 0.6%
Barrett Resources * .......................... 163,400 6,965
Devon Energy ................................. 300,387 10,438
Noble Affiliates ............................. 200,000 9,575
26,978
Energy Services 4.1%
BJ Services * ............................ 550,000 28,050
Camco International ...................... 550,000 25,369
Coflexip ADR ............................. 228,000 5,985
Cooper Cameron * ......................... 650,000 49,725
Smith International * .................... 600,000 26,925
Tuboscope Vetco * ........................ 400,000 6,175
Weatherford Enterra * .................... 1,200,000 36,000
178,229
Total Energy ............................. 205,207
<PAGE>
INDUSTRIAL 4.9%
Paper and Forest Products 0.3%
Lydall * ........................................ 500,000 11,250
11,250
Defense and Aerospace 0.2%
ECC International * ............................. 269,600 2,224
ECC International *++ ........................... 231,900 1,722
EchoStar Communications (Class A) * ............. 170,000 3,804
7,750
Auto Related 1.4%
APS Holding * ................................... 170,000 2,624
Custom Chrome * ................................. 240,000 4,800
Methode Electronics (Class A) ................... 437,100 8,742
OEA ............................................. 1,000,000 45,750
61,916
Machinery 2.3%
Berg Electronics * .............................. 335,400 9,852
Danaher ......................................... 400,000 18,650
DT Industries ................................... 150,000 5,212
Farrel .......................................... 200,000 525
Greenfield Industries ........................... 400,000 12,225
Osmonics * ...................................... 300,000 6,600
Prime Service * ................................. 135,000 3,713
Teleflex ........................................ 400,000 20,850
TriMas .......................................... 1,024,500 24,460
102,087
Specialty Chemicals 0.7%
Gelman Sciences *+ ............................ 438,600 14,255
GTS Duratek * ................................. 115,000 1,510
Polymer Group * ............................... 750,000 10,406
Synalloy ...................................... 223,650 3,606
29,777
Total Industrial .............................. 212,780
MISCELLANEOUS 2.5%
Delta Pine & Land ............................. 600,000 $ 19,200
Other Miscellaneous Portfolio Securities ...... 91,478
Total Miscellaneous ........................... 110,678
Total Portfolio Securities (Cost .............. $ 3,029,902) 4,296,568
<PAGE>
Short-Term Investments 1.6%
Commercial Paper 1.4%
Asset Securitization Cooperative,
4(2), 5.30%, 2/6/97 ................. $ 10,000,000 9,947
Cregem North America, 5.45%, 1/10/97 .......... 7,000,000 6,991
CS First Boston Group, 5.35%, 2/26/97 ......... 10,000,000 9,917
Delaware Funding, 4(2), 5.37%, 2/3/97 ......... 5,004,000 4,979
Investments in Commercial Paper
through a joint account
6.75 - 7.10%, 1/2/97 .................. 5,233,315 5,232
Merrill Lynch & Co., 5.34%, 1/13/97 ........... 10,000,000 9,982
SBNSW (Delaware), 5.37%, 2/13/97 .............. 10,000,000 9,936
Unifunding, 5.44%, 1/6/97 ..................... 3,000,000 2,998
59,982
Medium-Term Notes 0.2%
SMM Trust, VR, 5.644 %, 3/26/97 ............... 10,000,000 9,999
9,999
Total Short-Term Investments (Cost ............ $ 69,981) 69,981
Total Investments in Securities
100.1% of Net Assets (Cost $3,099,883) ........ $ 4,366,549
Other Assets Less Liabilities ................. (3,131)
NET ASSETS .................................... $ 4,363,418
- --------------------------------------------------------------------------------
* Non-income producing
+ Affiliated company
** Common stocks, rights, and warrants - cost $2,932,625, value $4,197,332,
96.2% of net assets Preferred stocks - cost $4,838, value $7,758, 0.2% of
net assets Miscellaneous securities - cost $92,439, value $91,478, 2.1% of
net assets
++ Securities contain some restrictions as to public resale--total of such
securities at year-end amounts to 0.57% of net assets.
4(2) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." VR Variable rate
GBP British sterling.
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
- --------------------------------------------------------------------------------
Assets
Investments in securities, at value
Affiliated companies (cost $286,898) $ 286,154
Other companies (cost $2,812,985) 4,080,395
Total investments in securities $ 4,366,549
Other assets 26,065
Total assets 4,392,614
Liabilities
Total liabilities 29,196
NET ASSETS $ 4,363,418
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions $ (17,232)
Net unrealized gain (loss) 1,266,666
Paid-in-capital applicable to 200,438,409
shares of $1.00 par value capital
stock outstanding; 300,000,000
shares authorized 3,113,984
NET ASSETS $ 4,363,418
NET ASSET VALUE PER SHARE $ 21.77
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
- --------------------------------------------------------------------------------
Year
Ended
12/31/96
- --------------------------------------------------------------------------------
Investment Income
Income
Interest $ 12,608
Dividend 6,022
Total income 18,630
Expenses
Investment management 25,875
Shareholder servicing 7,676
Prospectus and shareholder reports 328
Custody and accounting 283
Registration 87
Legal and audit 39
Directors 33
Miscellaneous 48
Total expenses 34,369
Net investment income (15,739)
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on
Securities 343,490
Foreign currency transactions 11
Net realized gain (loss) 343,501
Change in net unrealized gain or loss on securities 213,970
Net realized and unrealized gain (loss) 557,471
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 541,732
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
- --------------------------------------------------------------------------------
Year
Ended
12/31/96 12/31/95
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations
Net investment income $ (15,739) $ (5,105)
Net realized gain (loss) 343,501 337,164
Change in net unrealized
gain or loss 213,970 622,307
Increase (decrease) in net
assets from operations 541,732 954,366
Distributions to shareholders
Net realized gain (399,616) (298,405)
Capital share transactions *
Shares sold 1,865,221 836,250
Distributions reinvested 378,036 283,060
Shares redeemed (876,500) (569,103)
Increase (decrease) in net
assets from capital
share transactions 1,366,757 550,207
Net Assets
Increase (decrease) during period 1,508,873 1,206,168
Beginning of period 2,854,545 1,648,377
End of period $ 4,363,418 $ 2,854,545
*Share information
Shares sold 83,019 43,859
Distributions reinvested 17,615 14,002
Shares redeemed (39,435) (30,271)
Increase (decrease) in
shares outstanding 61,199 27,590
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company and commenced operations on June 3, 1960.
Valuation
Equity securities listed or regularly traded on a securities exchange are
valued at the last quoted sales price at the time the valuations are made. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Listed securities not traded on a particular day and securities regularly traded
in the over-the-counter market are valued at the mean of the latest bid and
asked prices. Other equity securities are valued at a price within the limits of
the latest bid and asked prices deemed by the Board of Directors, or by persons
delegated by the Board, best to reflect fair value.
Short-term debt securities are valued at their amortized cost which, when
combined with accrued interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Affiliated Companies
Investments in companies 5% or more of whose outstanding voting securities
are held by the fund are defined as "Affiliated Companies" in Section 2(a)(3) of
the Investment Company Act of 1940.
Currency Translation
Assets and liabilities are translated into U.S. dollars at the prevailing
exchange rate at the end of the reporting period. Purchases and sales of
securities and income and expenses are translated into U.S. dollars at the
prevailing exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
<PAGE>
Premiums and Discounts
Premiums and discounts on debt securities are amortized for both financial
reporting and tax purposes.
Other
Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Commercial Paper Joint Account
The fund, and other affiliated funds, may transfer uninvested cash into a
commercial paper joint account, the daily aggregate balance of which is invested
in high-grade commercial paper. All securities purchased by the joint account
satisfy the fund's criteria as to quality, yield, and liquidity.
Other
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $2,463,670,000 and $1,491,423,000, respectively, for the
year ended December 31, 1996.
NOTE 3 - FEDERAL INCOME TAXES
- --------------------------------------------------------------------------------
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1996. The results
of operations and net assets were not affected by the reclassifications.
================================================================================
Undistributed net investment income $ 15,739,000
Undistributed net realized gain (15,739,000)
- --------------------------------------------------------------------------------
<PAGE>
At December 31, 1996, the aggregate cost of investments for federal income
tax and financial reporting purposes was $3,099,883,000, and net unrealized gain
aggregated $1,266,666,000, of which $1,499,756,000 related to appreciated
investments and $233,090,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $2,501,000 was payable at December 31, 1996. The fee is computed daily
and paid monthly, and consists of an individual fund fee equal to 0.35% of
average daily net assets and a group fee. The group fee is based on the combined
assets of certain mutual funds sponsored by the manager or Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.305% for assets in excess of $50 billion. At
December 31, 1996, and for the year then ended, the effective annual group fee
rate was 0.33%. The fund pays a pro-rata share of the group fee based on the
ratio of its net assets to those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. (TRPS) is the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. Additionally, the fund is one of several T. Rowe
Price mutual funds (the underlying funds) in which the T. Rowe Price Spectrum
Growth Fund (Spectrum) invests. In accordance with an agreement among Spectrum,
the underlying funds, the manager, and TRPS, expenses from the operation of
Spectrum are borne by the underlying funds based on each underlying fund's
proportionate share of assets owned by Spectrum. The fund incurred expenses
pursuant to these related party agreements totaling approximately $6,539,000 for
the year ended December 31, 1996, of which $697,000 was payable at period-end.
<PAGE>
================================================================================
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
T. Rowe Price New Horizons Fund, Inc.
We have audited the accompanying statement of assets and liabilities of T.
Rowe Price New Horizons Fund, Inc., including the portfolio of investments, as
of December 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of T.
Rowe Price New Horizons Fund, Inc. as of December 31, 1996, the results of its
operations, the changes in its net assets and financial highlights for each of
the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 20, 1997
<PAGE>
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(R):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
http://www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price New Horizons Fund [Registration Mark.]
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
<PAGE>
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor.
RPRTNHF 12/31/96
