<PAGE> 1
[LOGO]
FINANCIAL
HORIZONS
Investment Trust
Growth Fund
Municipal Bond Fund
Government Bond Fund
Cash Reserve Fund
------------
1996
ANNUAL
REPORT
October 31, 1996
FINANCIAL HORIZONS INVESTMENT TRUST
P.O. BOX 1492
THREE NATIONWIDE PLAZA
COLUMBUS OH 43216-1492
October 31, 1996
Annual Report
BULK RATE
U.S. POSTAGE
PAID
CLEVELAND, OHIO
PERMIT NO. 2112
FH-0012-L
<PAGE> 2
CONTENTS
2............Message to Shareholders
3-4..........Statement of Investments
Growth Fund
5-6..........Statement of Investments
Municipal Bond Fund
7-8..........Statement of Investments
Government Bond Fund
9-10.........Statement of Investments
Cash Reserve Fund
11...........Statements of Assets and Liabilities
12...........Statements of Operations
13-14........Statements of Changes in
Net Assets
15-16........Financial Highlights
17-18........Notes to Financial Statements
19...........Independent Auditors' Report
TOLL-FREE TELEPHONE ASSISTANCE
General account service and exchanges:
1-800-848-0920
TRUSTEES
D. Richard McFerson - Chairman
Columbus, Ohio
Dr. John C. Bryant
Wilmington, Ohio
Robert M. Duncan
Columbus, Ohio
Dr. Thomas J. Kerr, IV
Westerville, Ohio
OFFICERS
James F. Laird, Jr. - Treasurer
Rae I. Mercer - Secretary
Craig A. Alvey - Assistant Treasurer
Craig A. Carver - Assistant Treasurer
William G. Goslee - Assistant Treasurer
Peter Neckermann - Assistant Treasurer
Harry A. Schermer - Assistant Treasurer
TRANSFER AGENT
Nationwide Investors Services, Inc.
Box 1492
Columbus, Ohio 43216-1492
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263-0001
LEGAL COUNSEL
Druen, Rath & Dietrich
One Nationwide Plaza
Columbus, Ohio 43215-2220
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215-2537
DISTRIBUTOR
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215-2220
This report is for the information of shareholders of the Financial Horizons
Investment Trust's mutual funds. It may be used as sales literature only when
preceded or accompanied by a current prospectus which gives further details
about the Funds.
Financial Horizons and its logo are service marks of Nationwide(R) Life
Insurance Company.
<PAGE> 3
[PICTURE]
TO OUR SHAREHOLDERS [LOGO]
Message to shareholders:
In 1996, the stock market has surged past the 6000 level, reaching record highs.
A combination of low inflation, high employment and strong levels of consumer
confidence have helped to fuel these gains.
Overall, economic fundamentals are good, despite being somewhat weaker than in
the past year. A period of slow growth is predicted for early in 1997, followed
by an anticipated phase of expansion in the second half of the year.
This report features detailed information on each Financial Horizons Investment
Trust fund and comments from your funds' portfolio managers. The Financial
Horizons Growth Fund rose 19.41% for the year ended October 31, 1996, assuming
all dividends were reinvested. The investment objective of this Fund is to seek
long-term capital appreciation.
Financial Horizons' Municipal Bond and Government Bond funds are appropriate for
investors seeking as high a level of income as is consistent with the
preservation of capital. The Municipal Bond Fund had a total return of 4.72% for
the year ended October 31, 1996, assuming all dividends were reinvested, while
the Government Bond Fund rose 5.01% for the same period.
The total return on the Financial Horizons Cash Reserve Fund was 4.97% for the
year ended October 31, 1996, compared to the Consumer Price Index total return
of 2.99%.
To help you execute transactions on your Financial Horizons Investment Trust
funds, you may call the toll-free shareholder service number at 1-800-848-0920.
Your account representative will be happy to help you with account instructions,
address changes, and investment or redemption requests.
We appreciate your confidence, and thank you for choosing the funds of the
Financial Horizons Investment Trust.
D. Richard McFerson, Chairman
December 1996
2
<PAGE> 4
Financial Horizons Investment Trust
Growth Fund
For the year ended October 31, 1996, the Financial Horizons Growth Fund had a
total return of 19.41%, compared with 24.10% for the S&P 500 over the same
period.
Performance during the first half of the Fund's fiscal year was favorably
influenced by substantial appreciation in many of its small-cap holdings.
Subsequently, the markets pulled back in June and July in response to earnings
reports coming in below expectations. Although it appeared that this could have
signaled the end of the bull market or a larger 10% pullback, stocks rebounded
as other companies reported continued earnings gains at or above expectations.
Technology stocks have recovered as we have seen more evidence that demand for
personal computers will continue to drive growth for semiconductor, software and
computer companies. Intel, the fund's largest holding, benefited from this
trend, and the stock has risen dramatically. A few other small-cap computer
software and equipment companies the fund has held also outperformed the market.
Conversely, Motorola, another large technology holding, has disappointed
investors as demand for cellular phones has decreased.
Financial stocks have, as in the past year, had strong gains, and benefited the
Fund's performance. We have added to holdings in this sector through two
credit-card companies: Capital One Financial and First USA. The Growth Fund has
also benefited from its holdings in the medical products and energy sectors.
Unfortunately, the Fund was underweighted in the energy sector during this
period of strong performance. Additions to this sector may occur in the future
since prospects for these companies remain favorable and valuations reasonable.
The Fund was also negatively impacted by its holdings in long distance
telecommunications stocks. AT&T and MCI Communications have been negatively
impacted by competitive pressures and their continued investments in new
technology and markets.
The Fund invests in companies with good growth prospects at reasonable
valuations. During this year it initiated holdings in Capital One Financial,
First USA, International Imaging Materials, Boston Scientific, Meridian
Diagnostics and FileNet when valuations were attractive. Conversely, positions
were liquidated in CFI Proservices and Medtronic when these companies appeared
overvalued. The emphasis in selecting securities continues to be potential
capital appreciation rather than dividend income. Therefore, the Fund usually
generates realized capital gains while net income is relatively low. Although
small-cap stocks are not a priority, the Fund will continue to take advantage of
the ability its size affords to hold these securities without sacrificing
liquidity.
Laura Klebe, MBA - Portfolio Manager
Fund Value $9,095,304
TOP FIVE EQUITY HOLDINGS
<TABLE>
<CAPTION>
Value %
- -----------------------------------------------------------
<S> <C> <C>
Intel Corp. $439,500 4.8%
Merrill Lynch & Co. 351,250 3.9%
SPSS, Inc. 311,250 3.4%
Archer Daniels Midland Co. 305,718 3.4%
Zebra Technologies Corp. 259,875 2.9%
</TABLE>
FUND PERFORMANCE
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth $24,594
S&P 500 $32,248
</TABLE>
Comparative performance of $10,000 invested in the Financial Horizons Investment
Trust Growth Fund since inception (12/19/88) and the S&P 500* over the period
since inception ended 10/31/96.
* The S&P 500 is a broad, unmanaged index of equity securities, and unlike the
Growth Fund returns, does not reflect any fees or expenses.
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 10/31/96
<TABLE>
<CAPTION>
1 Year 5 Year Life
<S> <C> <C> <C>
Without sales charge..........19.41%.....13.39%.....12.11%
With sales charge.............14.41%.....13.15%.....12.11%
</TABLE>
The without sales charge returns do not reflect the effects of sales charges.
The with sales charge assumes the applicable contingent deferred sales charge
(CDSC) was paid on withdrawals which has the most dramatic effect on the
one-year performance figures. The CDSC declines from 5% in the first year to 0%
after 6 years. These results include reinvestment of all dividends and capital
gains distributions. The life of the fund is 7.8 years.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than the original investment. Past performance is no
guarantee of future results.
3
<PAGE> 5
Financial Horizons Investment Trust - Statement of Investments October 31, 1996
Growth Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.9%)
---------------------
Airlines (1.0%)
---------------
6,000 Skywest, Inc. $ 90,000
----------
Business Equipment & Services (5.3%)
------------------------------------
7,500 American Business Information* 144,375
3,000 Healthcare Services Group* 28,875
6,600 Olsten Corp. (The) 132,000
10,000 TRO Learning, Inc.* 177,500
----------
482,750
----------
Chemicals (1.9%)
----------------
2,000 Sigma-Aldrich Corp. 117,500
1,000 Loctite Corp. 58,625
----------
176,125
----------
Communication-Equip (2.0%)
--------------------------
3,000 HBO & Co. 180,375
----------
Computer Equipment (1.7%)
-------------------------
7,000 American Power Corp.* 149,625
----------
Computers-Services & Software (4.8%)
------------------------------------
4,500 Filenet Corp.* 127,687
10,000 SPSS, Inc.* 311,250
----------
438,937
----------
Consumer Products (3.3%)
------------------------
16,000 National Picture & Frame* 184,000
4,000 Newell Co. 113,500
----------
297,500
----------
Contract Manufacturing (1.3%)
-----------------------------
5,500 DII Group, Inc.* 121,000
----------
Dental (0.9%)
-------------
2,000 Dentsply International, Inc. 84,250
----------
Distribution (1.6%)
-------------------
4,725 Bergen Brunswig Corp., Class A 148,247
----------
Drugs (4.2%)
------------
4,000 Allergan, Inc. 122,000
4,000 Schering-Plough Corp. 256,000
----------
378,000
----------
Electronics (7.5%)
------------------
4,000 Intel Corp. 439,500
2,000 Motorola, Inc. 92,000
11,100 Woodhead Industries, Inc. 152,625
----------
684,125
----------
Engineering and Construction (1.4%)
-----------------------------------
2,000 Fluor Corp. 131,000
----------
Financial (13.8%)
-----------------
3,645 Bear Stearns Companies, Inc. 86,113
4,500 Capital One Financial 140,062
1,600 First USA, Inc. 92,000
18,231 Gainsco, Inc. 175,473
5,000 Merrill Lynch & Co., Inc. 351,250
2,000 Morgan Stanley Group, Inc. 100,500
8,400 Silicon Valley Bancshares* 219,450
5,000 Standard Financial 89,062
----------
1,253,910
----------
Food & Beverage (1.0%)
----------------------
1,500 Grand Metropolitan PLC ADR 45,938
5,800 Grand Metropolitan PLC 43,776
----------
89,714
----------
<FN>
- ----------
The abbreviations in the above statement stand for the following:
PLC Public Limited Company
ADR American Depository Receipt
* Denotes a non-income producing security.
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percent of net assets.
See accompanying notes to financial statements.
<CAPTION>
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Food-Grain & Agriculture (4.5%)
-------------------------------
14,056 Archer Daniels Midland Co. $ 305,718
5,500 Northland Cranberrys, Class A 105,875
----------
411,593
----------
Healthcare Services (3.6%)
--------------------------
3,200 Apria Healthcare Group* 61,200
6,000 Columbia/HCA Healthcare Corp. 214,500
7,500 United American HealthCare* 46,875
----------
322,575
----------
Machinery & Capital Goods (4.7%)
--------------------------------
3,000 Duriron, Inc. 80,250
1,000 Emerson Electric Co. 89,000
9,000 Zebra Technologies Corp.* 259,875
----------
429,125
----------
Medical Products (4.4%)
-----------------------
5,000 Biomet, Inc. 80,625
4,000 Boston Scientific* 217,500
10,000 Meridian Diagnostics 105,000
----------
403,125
----------
Oil & Gas (2.9%)
----------------
1,300 Amoco Corp. 98,475
500 Royal Dutch Petroleum Co. 82,688
800 Texaco, Inc. 81,300
----------
262,463
----------
Pollution Control (0.9%)
------------------------
2,500 WMX Technologies, Inc. 85,938
----------
Printing & Publishing (4.2%)
----------------------------
6,400 International Imaging Materials* 152,000
6,000 Merrill Corp. 133,500
2,800 Reader's Digest Assoc., Inc., Class B 96,950
----------
382,450
----------
Restaurants (2.7%)
------------------
5,000 Bob Evans Farms, Inc. 62,500
8,800 Wendy's International, Inc. 181,500
----------
244,000
----------
Retail (5.6%)
-------------
9,999 CUC International* 244,976
3,000 Franklin Quest Co.* 60,750
5,000 Smart & Final, Inc. 117,500
4,000 Tractor Supply Co.* 83,000
----------
506,226
----------
Telecommunications (6.0%)
-------------------------
1,333 360 Communications Co.* 30,159
2,200 AT & T Corp. 76,725
712 Lucent Technologies, Inc. 33,464
9,800 MCI Communications Corp. 246,225
4,000 Sprint Corp. 157,000
----------
543,573
----------
Tire & Rubber (0.7%)
--------------------
3,000 Cooper Tire & Rubber Co. 58,875
Total common stocks (cost $5,667,901) 8,355,501
----------
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (7.9%)
----------------------------------
U.S. Treasury Bills
-------------------
$740,000 5.06% through 5.36%, due 02/13/97 through
07/24/97 (cost $720,332) 720,926
----------
Total investments (cost $6,388,233) $9,076,427
==========
</TABLE>
4
<PAGE> 6
Financial Horizons Investment Trust
Municipal Bond Fund
The municipal market has produced modest returns over the past 12 months, but
the road along the way was anything but smooth. Over the year, the Bond Buyer 11
Index moved from a yield of 5.62% to 5.60%. After rallying to 5.23% by February,
the market retraced all of its gains back to a peak of 6.02% by mid-June.
Inflationary fears that were prevalent in the spring months never materialized
into the economic numbers that followed. The Federal Reserve was content to
leave rates alone, allowing municipals to rally back to the current readings.
For the fiscal year, the Lehman Municipal Bond Index returned 5.70%, while the
Fund gained 4.72%.
Over the past year, we have continued to emphasize high credit quality but
switched to lower average coupons and slightly shorter average maturities. As a
result, our credit quality was maintained above a "Aa," our average coupon
declined from 6.16% to 5.83%, and our position in discount bonds (those bonds
priced below $98 per $100 of par value) increased from approximately 20% to 40%
of the portfolio. Average par-weighted maturity was shortened from 19.6 years to
19.0 years. By lowering the average coupon and increasing our position in
discount bonds, we have shifted the Fund into a more aggressive,
performance-oriented position. If rates continue to fall, we should be in a good
position to continue to capitalize on this opportunity. The current year's sales
have generated net capital gains, however there is a loss carry-forward that
will offset these gains and nullify their effects for tax-reporting purposes.
A moderation in the growth of the economy, coupled with confidence that the
Federal Reserve has effectively tamed inflation and will not have to raise rates
in the near term, is the foundation for this market's summer rally. Election
anxieties perhaps tempered the rally somewhat. With the election now in the
rearview mirror, the market can again focus on the solid fundamentals of
moderate growth and low inflation.
We have a well-balanced portfolio that is positioned to benefit from an
extension in the current market rally. We are constantly searching for value
through a disciplined swap program. Overall, we continue to take a long-term
perspective and look for positive performance in the future.
J. Randall Baney, MBA - Portfolio Manager
Fund Value $20,499,850
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
Value %
- -------------------------------------------------------------------------------
<S> <C> <C>
New Jersey Turnpike $1,092,500 5.3%
Nashville and Davidson County, Tennessee 1,068,625 5.2%
New York Local Government Asst 1,067,500 5.2%
Harris County, Texas 1,047,500 5.1%
Birmingham, Alabama 1,043,750 5.1%
</TABLE>
<TABLE>
<CAPTION>
FUND PERFORMANCE
1989 1990 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Muni Bond $17,078
Leh. Muni Bond $18,873
</TABLE>
Comparative performance of $10,000 invested in the Financial Horizons Investment
Trust Municipal Bond Fund since inception (12/19/88) and the Lehman Brothers
Municipal Bond Index* over the period since inception ended 10/31/96.
* The Lehman Brothers Municipal Bond Index represents an unmanaged group of
bonds that are not adjusted for expenses and includes bonds of lower quality
than those purchased by the Municipal Bond Fund. The investment return and
principal value will fluctuate. When redeemed, shares may be worth more or
less than the original investment.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 10/31/96
1 Year 5 Year Life
<S> <C> <C> <C>
Without sales charge...........4.72%......6.12%......7.04%
With sales charge ............-0.28%......5.80%......7.04%
</TABLE>
The without sales charge returns do not reflect the effects of sales charges.
The with sales charge assumes the applicable contingent deferred sales charge
(CDSC) was paid on withdrawals which has the most dramatic effect on the
one-year performance figures. The CDSC declines from 5% in the first year to 0%
after 6 years. These results include reinvestment of all dividends and capital
gains distributions. The life of the fund is 7.8 years.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than the original investment. Past performance is no
guarantee of future results.
5
<PAGE> 7
Financial Horizons Investment Trust - Statement of Investments October 31, 1996
Municipal Bond Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES (98.3%)
Alabama (5.1%)
--------------
$1,000,000 Birmingham, Alabama General Obligation
Refunding Bonds, Series 1992-B,
6.25%, 04/01/16 $ 1,043,750
------------
Florida (4.7%)
--------------
1,000,000 Orlando, Florida Utilities Commission
Water and Electric Subordinated
Revenue Refunding Bonds,
Series 1993-A, 5.25%, 10/01/14 957,500
------------
Illinois (9.7%)
---------------
1,000,000 Illinois Housing Development Authority
Homeowner Mortgage Revenue
Bonds, Series 1994-A-1, 6.45%, 08/01/17 1,027,500
1,000,000 Illinois Regional Transportation Authority,
General Obligation Refunding Bonds,
Series 1996, 5.40%, 06/01/15 961,250
------------
1,988,750
------------
Massachusetts (4.7%)
--------------------
1,000,000 Commonwealth of Massachusetts
General Obligation Refunding Bonds,
Series 1995-A, 5.00%, 07/01/10 957,500
------------
Nevada (4.8%)
-------------
1,000,000 Nevada State General Obligation, Nevada
Municipal Bond Bank Project,
Numbers 49 & 50, 5.50%, 11/01/16 980,000
------------
New Jersey (5.3%)
-----------------
1,000,000 New Jersey Turnpike Authority Turnpike
Revenue Bonds, Series 1991-C,
6.50%, 01/01/16 1,092,500
------------
New York (5.2%)
---------------
1,000,000 New York Local Government Assistance
Corporation, Series 1993-E, Refunding
Bonds, 6.00%, 04/01/14 1,067,500
------------
North Carolina (5.0%)
---------------------
1,000,000 Charlotte-Mecklenburg Hospital Authority,
North Carolina Health Care System
Revenue Bonds, Series 1992,
6.25%, 01/01/20 1,030,000
------------
South Carolina (5.0%)
---------------------
1,000,000 South Carolina State Housing Finance &
Development Authority Homeownership
Mortgage Purchase Bonds,
Series 1994-A, 6.375%, 07/01/16 1,015,000
------------
Tennessee (5.2%)
----------------
1,030,000 Nashville & Davidson County, Tennessee
General Obligation Multi-Purpose
Improvement Bonds, Series 1994,
6.125%, 05/15/14 1,068,625
------------
<FN>
- ----------
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Texas (19.2%)
-------------
$1,000,000 Carrollton -- Farmers Branch
Independent School District, Texas
General Obligation School Building
Unlimited Tax Bonds, Series 1995,
5.00%, 02/15/16 $ 930,000
1,000,000 Grand Prairie Independent School
District, Texas General Obligation
Unlimited Tax School Building and
Refunding Bonds, Series 1996,
5.20%, 02/15/17 946,250
1,000,000 Harris County, Texas Tax and Revenue
Certificates of Obligation, Series 1994,
6.10%, 10/01/13 1,047,500
1,000,000 Texas State Public Finance Authority
Building Revenue Refunding,
Series 1992-B, 5.75%, 02/01/12 1,011,250
------------
3,935,000
------------
Utah (4.9%)
-----------
1,000,000 Utah Housing Finance Agency, Multi-
Family Housing Revenue Refunding
Bonds, (Cottonwood Apartments
Project), Issue 1995, 6.30%, 07/01/15 1,011,250
------------
Virginia (14.9%)
----------------
1,000,000 Chesapeake, Virginia General Obligation
Water & Sewer Bonds, Series 1995-A,
5.375%, 12/01/20 956,250
1,000,000 Richmond, Virginia General Obligation
Public Improvement Refunding Bonds,
Series 1991-B, 6.25%, 01/15/18 1,035,000
900,000 Virginia Housing Development Authority
Commonwealth Mortgage Bonds,
Series 1992-C, Subseries C-7,
6.30%, 01/01/15 915,750
140,000 Virginia Housing Development Authority
Multi-Family Housing Bonds,
Series 1991-F, 7.10%, 05/01/13 148,050
------------
3,055,050
------------
Washington (4.6%)
-----------------
1,000,000 Seattle, Washington Limited Tax, General
Obligation Bonds, Series 1995, 5.125%, 942,500
07/01/15 ------------
Total long-term municipal securities
(cost $19,986,232) $20,144,925
============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 8
Financial Horizons Investment Trust
Government Bond Fund
Total return for the Financial Horizons Government Bond Fund for the year ended
October 31, 1996, was 5.01% compared to a total return of 5.05% for its
benchmark index, the Merrill Lynch Government Master Index.
Early in the year, fears of higher inflation led to an increase in interest
rates. As favorable inflation results have been released over the past two
months, inflationary concerns have eased and rates have declined from their
highs at midyear. The net change in interest rates over the past 12 months was
an increase of approximately .30 percent in intermediate and long rates. The
current stable inflation environment is favorable for the bond market.
The Government Bond Fund continues to be invested in spread product including
sectors of the government agency and mortgage-backed markets perceived to be
undervalued. Approximately one-third of portfolio assets are invested in the
collateralized mortgage obligation (CMO) market. The yield on these
conservatively structured investments continues to make them attractive
portfolio holdings.
Wayne T. Frisbee, CFA - Portfolio Manager
Fund Value $58,736,729
<TABLE>
<CAPTION>
TOP FIVE BOND HOLDINGS
Value %
- -------------------------------------------------------------------------------
<S> <C> <C>
Resolution Funding $14,577,892 24.8%
FNMA REMICS 13,130,822 22.4%
Federal National Mortgage Association 9,270,147 15.8%
FHLMC REMICS 6,882,563 11.7%
Federal Home Loan Banks 4,012,716 6.8%
</TABLE>
<TABLE>
<CAPTION>
FUND PERFORMANCE
1989 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gov't Bond $19,926
M. Lynch $19,905
</TABLE>
Comparative performance of $10,000 invested in the Financial Horizons Investment
Trust Government Bond Fund since inception (12/19/88) and the Merrill Lynch
Government Master Index* over the period since inception ended 10/31/96.
* The Merrill Lynch Government Master Index is an index of unmanaged bonds
which unlike the Government Bond Fund returns, do not reflect any fees or
expenses. The investment return and principal value will fluctuate. When
redeemed, shares may be worth more or less than the original investment.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 10/31/96
1 Year 5 Year Life
<S> <C> <C> <C>
Without sales charge...........5.01%......7.47%......9.16%
With sales charge..............0.08%......7.17%......9.16%
</TABLE>
The without sales charge returns do not reflect the effects of sales charges.
The with sales charge assumes the applicable contingent deferred sales charge
(CDSC) was paid on withdrawals which has the most dramatic effect on the
one-year performance figures. The CDSC declines from 5% in the first year to 0%
after 6 years. These results include reinvestment of all dividends and capital
gains distributions. The life of the fund is 7.8 years.
Investment return and principal value will fluctuate, and when redeemed, shares
may be worth more or less than the original investment. Past performance is no
guarantee of future results.
7
<PAGE> 9
Financial Horizons Investment Trust - Statement of Investments October 31, 1996
Government Bond Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE BACKED SECURITIES (34.1%)
----------------------------------
$ 707,185 FHLMC (REMIC) Series 190-D,
9.20%, 10/15/21 $ 738,929
3,000,000 FHLMC (REMIC) Series 1344-D,
6.00%, 08/15/07 2,801,368
1,289,219 FHLMC (REMIC) Series 31-E,
7.55%, 05/15/20 1,306,068
2,000,000 FHLMC (REMIC) Series 1313-G,
7.25%, 06/15/07 2,036,198
1,000,000 FNMA (REMIC) Series 93-203 PJ,
6.50%, 10/25/23 981,009
422,198 FNMA (REMIC) Series 1989-86,
8.75%, 11/25/19 443,459
4,000,000 FNMA (REMIC) Series 1990-16D,
9.00%, 03/25/20 4,202,476
589,820 FNMA (REMIC) Series 1991-68E,
8.35%, 10/25/03 593,287
923,312 FNMA (REMIC) Series 1991-73A,
8.00%, 07/25/21 952,063
1,743,142 FNMA (REMIC) Series 90-7-B,
8.50%, 01/25/20 1,815,132
4,000,000 FNMA (REMIC) Series 92-126,
8.00%, 07/25/02 4,143,396
-----------
Total mortgage backed securities
(cost $19,643,084) 20,013,385
-----------
<FN>
- ----------
The abbreviations in the above statement stand for the following:
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
REMIC Real Estate Mortgage Investment Conduit
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent market value as a percentage of net
assets.
See accompanying notes to financial statements.
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY LONG-TERM
OBLIGATIONS (52.6%)
------------------------------------
$ 4,000,000 Federal Home Loan Banks, 6.36%, 03/21/01 $ 4,012,716
3,000,000 Federal Home Loan Mortgage Corp.,
7.445%, 04/14/04 3,047,901
4,030,000 Federal National Mortgage Assoc.,
8.25%, 10/12/04 4,209,134
4,000,000 Federal National Mortgage Assoc.,
8.55%, 12/10/04 4,064,048
1,000,000 Federal National Mortgage Assoc.,
7.26%, 10/05/05 996,965
15,000,000 Resolution Funding STRIPS, 0.00%, 04/15/06 8,099,235
3,000,000 Resolution Funding STRIPS, 0.00%, 04/15/08 1,401,477
10,000,000 Resolution Funding STRIPS, 0.00%, 07/15/13 3,165,290
10,000,000 Resolution Funding STRIPS, 0.00%, 07/15/20 1,911,890
-----------
Total U.S. government and agency
long-term obligations
(cost $30,020,695) 30,908,656
-----------
REPURCHASE AGREEMENT (13.4%)
----------------------------
7,894,000 Prudential Securities, 5.55%, due 11/01/96,
Collateralized by $8,035,000, Sallie Mae
Floating Rate Note, due 04/10/97, market
value $8,055,088 (cost $7,894,000) 7,894,000
-----------
Total investments (cost $57,557,779) $58,816,041
===========
</TABLE>
8
<PAGE> 10
Financial Horizons Investment Trust
Cash Reserve Fund
The Financial Horizons Cash Reserve Fund had total assets of $4.2 million for
the year ended October 31, 1996. The average maturity totaled 37 days.
Commercial paper accounted for 89% of the Fund, followed by Canadian Government
obligations (7%) and U.S. Government & Agency securities (4%). Commercial paper
continues to have a yield advantage over other money market instruments.
Total return on the Cash Reserve Fund was 4.97% for the year ended October 31,
1996, compared to the Consumer Price Index total return of 2.99%. The 30-day
current yield in the same period was 4.77% with an effective yield of 4.88%.
The Federal Open Market Committee left interest rates unchanged for most of
1996. The last time they adjusted rates was in January 1996. At that time the
Federal Funds rate was lowered to 5.00% from 5.25%. Future rate changes will
depend on the Committee's perception on both economic growth and inflation.
The Financial Horizons Cash Reserve Fund continues to invest in only
high-quality, first-tier money market instruments. An internal credit review is
completed on all issuers prior to investment.
Karen G. Mader, MA - Portfolio Manager
Fund Value $4,242,751
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
Value %
- -------------------------------------------------------------------------------
<S> <C> <C>
Sonoco Products Co. $164,567 3.9%
Clorox Co. 161,544 3.8%
Merrill Lynch & Co. 159,903 3.8%
Caterpillar Financial Services 159,694 3.8%
Canadian Wheat Board 159,667 3.8%
</TABLE>
<TABLE>
<CAPTION>
FUND PERFORMANCE
1989 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Reserve $14,384
CPI $13,126
</TABLE>
Comparative performance of $10,000 invested in the Financial Horizons Investment
Trust Cash Reserve Fund since inception (12/19/88) and the Consumer Price Index*
over the period since inception ended 10/31/96.
* The Consumer Price Index is a broad index reflecting price changes in a
market basket of consumer goods and, unlike the Cash Reserve Fund, does not
reflect any fees or expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 10/31/96
1 Year 5 Year Life
<S> <C> <C> <C>
Without sales charge...........4.97%......3.70%......4.73%
</TABLE>
These results include reinvestment of all dividends and capital gains
distributions. The life of the fund is 7.8 years.
An investment in the Cash Reserve Fund is neither insured nor guaranteed by the
U.S. Government and there can be no assurance that it will be able to maintain a
stable net asset value of $1.00 a share. Past performance is no guarantee of
future results.
9
<PAGE> 11
Financial Horizons Investment Trust - Statement of Investments October 31, 1996
Cash Reserve Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
CANADIAN GOVERNMENT OBLIGATIONS (7.3%)
---------------------------------------
$152,000 British Columbia Province, 5.28%,
due 02/03/97 $ 149,905
160,000 Canadian Wheat Board, 5.35%, due 11/15/96 159,667
----------
Total Canadian government obligations
(cost $309,572) 309,572
----------
COMMERCIAL PAPER (89.1%)
------------------------
Agriculture/Finance (3.8%)
--------------------------
160,000 Deere, John Capital, 5.24%, due 11/26/96 159,418
----------
Auto/Finance (3.8%)
-------------------
160,000 Ford Motor Credit, 5.26%, due 11/25/96 159,439
Banks (2.3%)
------------
100,000 National City Credit, 5.35%, due 11/15/96 99,792
----------
Broker/Dealers (14.5%)
----------------------
140,000 Dean Witter Discover, 5.25%, due 11/25/96 139,510
156,000 Goldman Sachs Group, 5.26%,
due 11/27/96 155,407
160,000 Merrill Lynch & Co. 5.44%, due 11/05/96 159,903
160,000 Smith Barney, Inc., 5.27%, due 12/05/96 159,204
----------
614,024
----------
Captive Borrow Conduit (3.2%)
-----------------------------
138,000 Prudential Funding, 5.23%, due 12/09/96 137,238
----------
Chemicals (6.1%)
----------------
116,000 Monsanto Co., 5.45%, due 11/19/96 115,684
145,000 PPG Industries, 5.24%, due 12/10/96 144,177
----------
259,861
----------
Consumer Products (3.8%)
------------------------
162,000 Clorox Co. 5.33%, due 11/20/96 161,544
----------
Consumer Sales Finance (12.5%)
------------------------------
105,000 Amer. Exp. Credit Corp., 5.29%, due 11/08/96 104,893
146,000 Avco Financial Serv., 5.26%, due 12/10/96 145,168
143,000 Beneficial Corp., 5.26%, due 11/13/96 142,749
140,000 Norwest Financial, 5.31%, due 01/27/97 138,203
----------
531,013
----------
<FN>
- ----------
Cost also represents cost for Federal income tax purposes.
Portfolio holding percentages represent value as a percentage of net assets.
See accompanying notes to financial statements.
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL SECURITY VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Diversified Finance (3.6%)
--------------------------
$154,000 GE Capital Corp., 5.29%, due 11/18/96 $ 153,615
----------
Entertainment (2.3%)
--------------------
100,000 Walt Disney Co., 5.42%,
due 11/20/96 99,714
----------
Heavy Equipment/Finance (3.8%)
------------------------------
160,000 Caterpillar Financial Ser., 5.25%,
due 11/13/96 159,694
----------
Insurance (9.4%)
----------------
130,000 AIG Funding, Inc., 5.24%, due 12/17/96 129,130
130,000 MetLife Funding Inc., 5.24%, due 12/16/96 129,148
140,000 Principal Mutual, 5.24%, due 11/13/96 139,755
----------
398,033
----------
Lease Financing (3.2%)
----------------------
137,000 PHH Corp., 5.23%, due 11/04/96 136,940
----------
Manufacturing/Diversified (3.3%)
--------------------------------
140,000 Raytheon Co., 5.23%, due 11/05/96 139,919
----------
Packaging/Containers (2.6%)
---------------------------
110,000 Bemis Co., Inc., 5.26%, due 12/03/96 109,486
----------
Paper and Forest Products (3.9%)
--------------------------------
165,000 Sonoco Products Co., 5.25%, due 11/19/96 164,567
----------
Pharmaceuticals/Health Care (7.0%)
----------------------------------
150,000 Abbott Laboratories, 5.25%, due 01/16/97 148,337
150,000 Schering Corp., 5.40%, due 02/18/97 147,548
----------
295,885
----------
Total commercial paper (cost $3,780,182) 3,780,182
----------
U.S. GOVERNMENT OBLIGATIONS (1.4%)
----------------------------------
60,000 U.S. Treasury Bills, 5.14%, due 06/26/97
(cost $57,970) 57,970
----------
U.S. AGENCY-FULL FAITH & CREDIT (2.3%)
--------------------------------------
100,000 Federal National Mortgage Association
5.47%, due 02/10/97 (cost $98,465) 98,465
----------
Total investments (cost $4,246,189) $4,246,189
===========
</TABLE>
10
<PAGE> 12
Financial Horizons Investment Trust October 31, 1996
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
MUNICIPAL GOVERNMENT CASH
GROWTH BOND BOND RESERVE
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost $6,388,233,
$19,986,232, $49,663,779 and $4,246,189, respectively) $9,076,427 $20,144,925 $50,922,041 $4,246,189
Repurchase agreements (cost $7,894,000) -- -- 7,894,000 --
--------------------------------------------------------
Total investments 9,076,427 20,144,925 58,816,041 4,246,189
Cash 29,069 223,314 30,032 519
Receivable for Fund shares sold 127 -- -- --
Receivable for investment securities sold -- -- 13,209 --
Accrued interest and dividends receivable 5,924 333,877 322,626 --
--------------------------------------------------------
TOTAL ASSETS 9,111,547 20,702,116 59,181,908 4,246,708
LIABILITIES
Payable for Fund shares redeemed 3,953 134,945 229,214 267
Accrued management fees 4,998 11,366 32,203 1,427
Accrued transfer agent fees 1,000 1,168 3,956 77
Accrued distribution fees 3,846 8,743 -- --
Dividends payable -- 34,553 152,402 1,243
Other accrued expenses 2,446 11,491 27,404 943
--------------------------------------------------------
TOTAL LIABILITIES 16,243 202,266 445,179 3,957
--------------------------------------------------------
NET ASSETS $9,095,304 $20,499,850 $58,736,729 $4,242,751
========================================================
NET ASSETS REPRESENTED BY:
Capital Shares, $1 par value, outstanding $ 467,236 $1,903,494 $55,376,700 $4,242,870
Capital paid in excess of par value 5,486,141 19,388,899 53,402,393 (105)
Net unrealized appreciation 2,688,194 158,693 1,258,262 --
Accumulated undistributed net realized gain (loss) 458,096 (950,935) (1,301,670) (6)
Accumulated undistributed (distributions in excess of) net
investment income (4,363) (301) 1,044 (8)
--------------------------------------------------------
NET ASSETS $9,095,304 $20,499,850 $58,736,729 $4,242,751
========================================================
Shares outstanding (unlimited number of shares authorized) 467,236 1,903,494 5,376,700 4,242,870
========================================================
NET ASSET VALUE AND OFFERING PRICE PER SHARE* $ 19.47 $ 10.77 $ 10.92 $ 1.00
========================================================
<FN>
* For the Growth Fund, the Municipal Bond Fund, and the Government Bond Fund, the redemption price per share varies by the
length of time shares are held.
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 13
Financial Horizons Investment Trust For the year ended October 31, 1996
Statements of Operations
<TABLE>
<CAPTION>
MUNICIPAL GOVERNMENT CASH
GROWTH BOND BOND RESERVE
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends $ 81,409 -- -- --
Interest 40,820 $1,366,936 $ 4,351,716 $229,490
Other -- -- 171,119 --
----------------------------------------------------
Total income 122,229 1,366,936 4,522,835 229,490
EXPENSES:
Distribution fees 62,370 174,226 476,865 --
Investment management fees 54,053 150,996 414,415 16,666
Transfer agent fees 11,898 14,136 57,100 966
Professional services 1,934 5,474 15,020 1,052
Registration fees 2,235 1,783 4,963 2,452
Shareholders' reports 3,500 4,490 11,200 275
Custodian fees 2,100 16,600 11,500 4,503
Trustee fees and expenses 1,136 3,555 9,655 625
Other 1,508 2,553 9,724 468
----------------------------------------------------
Total expenses before waived expenses 140,734 373,813 1,010,442 27,007
Total waived expenses 20,790 58,074 476,865 --
----------------------------------------------------
Net expenses 119,944 315,739 533,577 27,007
----------------------------------------------------
NET INVESTMENT INCOME $ 2,285 $1,051,197 $ 3,989,258 $202,483
====================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments $1,456,661 $ 249,540 $ 746,770 $ (3)
Net change in unrealized appreciation (depreciation) of investments 995,019 (275,812) (1,785,043) --
----------------------------------------------------
Net realized and unrealized gain (loss) on investments 1,451,680 (26,272) (1,038,273) (3)
----------------------------------------------------
NET INCREASE IN ASSETS RESULTING FROM OPERATIONS $1,453,965 $1,024,925 $ 2,950,985 $202,480
====================================================
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 14
Financial Horizons Investment Trust
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
GROWTH FUND MUNICIPAL BOND FUND
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 2,285 (3,646) $ 1,051,197 $ 1,267,905
Net realized gain (loss) on investments 456,661 821,167 249,540 (809,772)
Net change in unrealized appreciation (depreciation) of
investments 995,019 607,704 (275,812) 3,105,091
--------------------------------------------------------
Net increase in net assets resulting from operations 1,453,965 1,425,225 1,024,925 3,563,224
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (1,051,197) (1,266,974)
In excess of net investment income -- (5,505) (301) --
Net realized gain from investment transactions (819,732) (65,310) -- --
--------------------------------------------------------
Decrease in net assets from distributions to shareholders (819,732) (70,815) (1,051,498) (1,266,974)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 896,371 520,132 83,672 437,772
Net asset value of shares issued to shareholders from reinvestment
of dividends 806,112 69,603 617,827 827,461
Cost of shares redeemed (835,073) (1,137,884) (5,980,992) (4,168,004)
--------------------------------------------------------
Increase (decrease) in net assets derived from capital share
transactions 867,410 (548,149) (5,279,493) (2,902,771)
--------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 1,501,643 806,261 (5,306,066) (606,521)
NET ASSETS-- BEGINNING OF PERIOD 7,593,661 6,787,400 25,805,916 26,412,437
--------------------------------------------------------
NET ASSETS-- END OF PERIOD $9,095,304 $ 7,593,661 $20,499,850 $25,805,916
========================================================
Undistributed net realized gain (loss) on investments included
in net assets at end of period $ 458,096 $ 821,167 $ (950,935) $(1,200,475)
========================================================
Undistributed (distributions in excess of) net investment income
included in net assets at end of period $ (4,363) $ (6,648) $ (301) $ (5,752)
========================================================
SHARE ACTIVITY:
Shares sold 48,331 32,495 7,850 42,427
Reinvestment of dividends 46,328 4,761 57,620 80,208
Shares redeemed (45,321) (68,472) (559,944) (403,632)
--------------------------------------------------------
Net increase (decrease) in number of shares 49,338 (31,216) (494,474) (280,997)
========================================================
See accompanying notes to financial statements.
13
</TABLE>
<PAGE> 15
Financial Horizons Investment Trust
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND CASH RESERVE FUND
Year ended Year ended Year ended Year ended
October 31, October 31, October 31, October 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 3,989,258 $ 4,424,602 $ 202,483 $ 218,960
Net realized gain (loss) on investments 746,770 500,983 (3) (3)
Net change in unrealized appreciation (depreciation) of investments (1,785,043) 5,712,175 -- --
-------------------------------------------------------
Net increase in net assets resulting from operations 2,950,985 10,637,760 202,480 218,957
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,988,214) (4,454,858) (202,483) (218,917)
In excess of net investment income -- -- (8) --
Net realized gain from investment transactions -- -- -- (35)
Paid in capital -- (14,227) (105) --
-------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,988,214) (4,469,085) (202,596) (218,952)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 452,449 1,055,320 280,277 890,988
Net asset value of shares issued to shareholders from reinvestment
of dividends 2,053,433 2,526,566 186,091 213,199
Cost of shares redeemed (11,921,797) (10,778,823) (373,733) (903,863)
-------------------------------------------------------
Increase (decrease) in net assets derived from capital share transactions (9,415,915) (7,196,937) 92,635 200,324
-------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (10,453,144) (1,028,262) 92,519 200,329
NET ASSETS-- BEGINNING OF PERIOD 69,189,873 70,218,135 4,150,232 3,949,903
-------------------------------------------------------
NET ASSETS-- END OF PERIOD $ 58,736,729 $ 69,189,873 $ 4,242,751 $ 4,150,232
=======================================================
Undistributed net realized gain (loss) on investments included in net
assets at end of period $ (1,301,670) $ (2,048,440) $ (6) $ (3)
=======================================================
Undistributed (distributions in excess of) net investment income
included in net assets at end of period $ 1,044 $ -- $ (8) $ --
=======================================================
SHARE ACTIVITY:
Shares sold 40,874 100,153 280,277 890,988
Reinvestment of dividends 188,895 239,877 186,091 213,199
Shares redeemed (1,101,948) (1,029,256) (373,733) (903,863)
-------------------------------------------------------
Net increase (decrease) in number of shares (872,179) (689,226) 92,635 200,324
=======================================================
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 16
Financial Horizons Investment Trust Selected data for each share
of capital stock outstanding
Financial Highlights
<TABLE>
<CAPTION>
GROWTH FUND MUNICIPAL BOND FUND
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
BEGINNING OF PERIOD $18.17 $15.11 $14.17 $12.46 $11.99 $ 10.76 $ 9.86 $ 11.75 $ 10.64 $ 10.61
Net investment income (loss) .01 (0.01) 0.03 0.08 0.22 0.48 0.50 0.49 0.56 0.61
Net realized gain (loss) and
unrealized appreciation
(depreciation) 3.28 3.23 0.95 1.73 0.43 0.01 0.90 (1.62) 1.22 0.07
---------------------------------------------- -----------------------------------------------
Total from investment operations 3.29 3.22 0.98 1.81 0.65 0.49 1.40 (1.13) 1.78 0.68
Dividends from net investment
income -- -- (0.04) (0.10) (0.18) (0.48) (0.50) (0.49) (0.56) (0.61)
Distributions in excess of net
investment income -- (0.01) -- -- -- -- -- -- -- --
Distributions from net realized
gain from investment
transactions (1.99) (0.15) -- -- -- -- -- (0.27) (0.11) (0.04)
---------------------------------------------- -----------------------------------------------
Total distributions (1.99) (0.16) (0.04) (0.10) (0.18) (0.48) (0.50) (0.76) (0.67) (0.65)
---------------------------------------------- -----------------------------------------------
Net increase (decrease) in net
asset value 1.30 3.06 0.94 1.71 0.47 0.01 0.90 (1.89) 1.11 0.03
---------------------------------------------- -----------------------------------------------
NET ASSET VALUE --
END OF PERIOD $19.47 $18.17 $15.11 $14.17 $12.46 $ 10.77 $ 10.76 $ 9.86 $ 11.75 $ 10.64
============================================== ===============================================
Total Return 19.41% 21.57% 6.92% 14.59% 5.42% 4.72% 14.50% (10.11%) 17.18% 6.56%
Net Assets, End of Period (000) $9,095 $7,594 $6,787 $5,165 $3,095 $20,500 $25,806 $26,412 $25,828 $14,641
Ratio of expenses to average
net assets 1.44% 1.47% 1.59% 1.44% 1.27% 1.36% 1.35% 1.27% 1.01% 0.65%
Ratio of expenses to average
net assets* 1.69% 1.72% 1.90% 2.03% 2.02% 1.61% 1.60% 1.57% 1.61% 1.62%
Ratio of net investment income
(loss) to average net assets 0.03% (0.05%) 0.21% 0.63% 1.45% 4.53% 4.82% 4.58% 4.81% 5.65%
Ratio of net investment income
(loss) to average net assets* (0.22%) (0.30%) (0.82%) 0.05% 0.70% 4.28% 4.57% 4.28% 4.11% 4.68%
Portfolio turnover 17.19% 29.19% 14.14% 12.98% 12.14% 38.80% 60.79% 69.67% 46.95% 57.98%
Average commission rate paid** 5.9080(cent) -- -- -- -- -- -- -- -- --
<FN>
- ----------
*Ratios calculated as if no expenses were waived.
**Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 17
Financial Horizons Investment Trust Selected data for each share
of capital stock outstanding
Financial Highlights
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND CASH RESERVE FUND
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
BEGINNING OF PERIOD $ 11.07 $ 10.12 $ 11.31 $ 11.00 $ 10.81 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.68 0.68 0.58 0.63 0.89 0.05 0.05 0.03 0.02 0.03
Net realized gain (loss) and
unrealized appreciation
(depreciation) (0.15) 0.95 (1.10) 0.50 0.25 -- -- -- -- --
----------------------------------------------- ------------------------------------------
Total from investment operations 0.53 1.63 (0.52) 1.13 1.14 0.05 0.05 0.03 0.02 0.03
Dividends from net investment
income (0.68) (0.68) (0.58) (0.66) (0.89) (0.05) (0.05) (0.03) (0.02) (0.03)
Distributions from net realized
gain from investment
transactions -- -- (0.09) (0.16) (0.06) -- -- -- -- --
----------------------------------------------- ------------------------------------------
Total distributions (0.68) (0.68) (0.67) (0.82) (0.95) (0.05) (0.05) (0.03) (0.02) (0.03)
----------------------------------------------- ------------------------------------------
Net increase (decrease) in net
asset value (0.15) 0.95 (1.19) 0.31 0.19 -- -- -- -- --
----------------------------------------------- ------------------------------------------
NET ASSET VALUE --
END OF PERIOD $ 10.92 $ 11.07 $ 10.12 $ 11.31 $ 11.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============================================== ==========================================
Total Return 5.01% 16.68% (4.75%) 10.76% 10.93% 4.97% 5.41% 3.08% 2.05% 3.07%
Net Assets, End of Period (000) $58,737 $69,190 $70,218 $84,602 $64,249 $4,243 $4,150 $3,950 $2,788 $2,538
Ratio of expenses to average
net assets 0.84% 0.89% 1.28% 1.00% 0.65% 0.65% 0.65% 0.84% 1.17% 1.06%
Ratio of expenses to average
net assets* 1.59% 1.58% 1.58% 1.61% 1.66% 0.65% 0.65% 1.06% 2.20% 1.82%
Ratio of net investment income
to average net assets 6.26% 6.42% 5.42% 5.55% 8.18% 4.86% 5.29% 3.14% 2.04% 3.02%
Ratio of net investment income
to average net assets* 5.51% 5.73% 5.12% 4.93% 7.17% 4.86% 5.29% 2.92% 0.79% 2.28%
Portfolio turnover 21.04% 140.55% 174.40% 143.63% 87.67% -- -- -- -- --
<FN>
- ----------
* Ratios calculated as if no expenses were waived.
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 18
Financial Horizons Investment Trust October 31, 1996
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Horizons Investment Trust (Trust), is a diversified, open-end
investment company organized under the laws of Massachusetts by a Declaration of
Trust dated May 9, 1988. The Trust offers shares in four separate mutual funds
which are registered under the Investment Company Act of 1940.
(a) Security Valuation
----------------------
(1) Growth Fund, Municipal Bond Fund and Government Bond Fund: Securities
traded on a national securities exchange are valued at closing prices.
Listed securities for which no sale was reported on the valuation date
are valued at quoted bid prices.
(2) Cash Reserve Fund: Securities are valued at amortized cost, which
approximates market value, in accordance with Rule 2a-7 of the
Investment Company Act of 1940, as amended.
(b) Security Transactions and Investment Income
----------------------------------------------
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date; interest income, including the pro rata
amortization of premium and discount where applicable, is recorded on an
accrual basis.
(c) Federal Income Taxes
------------------------
The Trust's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute all its taxable income to shareholders.
As of October 31, 1996, the Municipal and Government Bond Funds had net
capital loss carry forwards of $950,935, and $1,301,670, respectively,
available to offset future capital gains, which will expire in 6 to 7
years.
(d) Dividends to Shareholders
-------------------------------
(1) Growth Fund:
Dividends are paid semi-annually and are recorded on the ex-dividend
date.
(2) Municipal Bond Fund, Government Bond Fund, and Cash Reserve Fund:
Dividends are declared daily and paid monthly from net investment
income.
Distributable net realized capital gains are declared and distributed at
least annually for all funds.
Dividends and distributions to shareholders are determined in accordance
with federal income tax regulations which may differ from generally
accepted accounting principles. These "book/tax" differences are
considered either permanent or temporary in nature. In accordance with
AICPA Statement of Position 93-2, permanent differences are reclassified
within the capital accounts based on their nature for federal income tax
purposes; temporary differences do not require reclassification. Dividends
and distributions that exceed net investment income and net realized gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income and net realized gains. To
the extent distributions exceed current and accumulated earnings and
profits, they are reported as distributions of paid-in-capital. These
reclassifications have no effect upon the net asset value of the
respective funds.
Accordingly, as of October 31, 1996, undistributed net investment income
and paid-in-capital have been adjusted by the following amount:
<TABLE>
<CAPTION>
UNDISTRIBUTED NET
INVESTMENT INCOME PAID-IN-CAPITAL
<S> <C> <C>
Municipal Bond Fund ($5,752) $5,752
</TABLE>
(e) Expenses
--------------
Direct expenses of a fund are allocated to that fund. General expenses of
the Trust are allocated to the funds based upon each fund's relative
average net assets.
17
<PAGE> 19
Financial Horizons Investment Trust October 31, 1996
Notes to Financial Statements (continued)
(f) Use of Estimates
----------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
2. TRANSACTIONS WITH AFFILIATES
As investment manager for the funds, Nationwide Advisory Services, Inc. (NAS),
(formerly Nationwide Financial Services, Inc.), an affiliated company, earns an
annual fee of .65% based on the average daily net assets of the Growth Fund,
Municipal Bond Fund and Government Bond Fund and .40% of the average daily net
asset of the Cash Reserve Fund.
NAS also receives fees for distribution pursuant to a Rule 12b-1 Distribution
Plan approved by the Board of Trustees. These fees are based on average daily
net assets of the Growth Fund, the Municipal Bond Fund, and the Government Bond
Fund at an annual rate of .75%. During the year ended October 31, 1996, NAS
waived distribution fees for the Growth, Municipal Bond, and Government Bond
Funds totaling $20,790, $58,074, and $476,865, respectively, representing .25%,
.25%, and .75% or $.046, $.027, and $.081 per average share outstanding.
NAS also receives fees as principal underwriter from contingent deferred sales
charges (CDSC) ranging from 5% to 1%, imposed on redemptions which cause the
current value of an account to fall below the total purchase payments made
during the past six years. During the year ended October 31, 1996, NAS received
fees of $12,788, $118,289, $36,566, and $1,593 on the Growth, Municipal Bond,
Government Bond, and Cash Reserve Funds, respectively. Additionally, the
Government Bond Fund retained fees (CDSC) of $171,119 pursuant to NASD
guidelines which limit sales charges payable to underwriters. These fees are
reported as "other income."
A subsidiary of NAS (Nationwide Investors Services, Inc.) acts as transfer and
dividend disbursing agent for the funds.
3. BANK LOANS
The Trust has an unsecured bank line of credit of $6,000,000. Borrowings under
this arrangement bear interest at the Federal Funds rate plus .50%. No
compensating balances are required, and there were no outstanding balances at
October 31, 1996.
4. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding U.S. Government and
short-term securities) and purchases and sales of U.S. Government Obligations
for the year ended October 31, 1996, are summarized as follows:
<TABLE>
<CAPTION>
SECURITIES U.S. GOVT. OBLIGATIONS
PURCHASES SALES PURCHASES SALES
<S> <C> <C> <C> <C>
Growth Fund $1,314,505 $ 1,398,557 $ 2,199,583 $ 2,067,484
Municipal Bond Fund 8,809,010 14,273,766 -- --
Government Bond Fund 204,679 4,044,039 12,570,795 24,928,887
Cash Reserve Fund -- -- 702,640 690,000
</TABLE>
Realized gains and losses have been computed on the first-in, first-out basis.
Included in net unrealized appreciation at October 31, 1996, are the following
components:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
GAINS LOSSES APPRECIATION
<S> <C> <C> <C>
Growth Fund $2,861,926 $(173,732) $2,688,194
Municipal Bond Fund 354,539 (195,846) 158,693
Government Bond Fund 1,470,150 (211,888) 1,258,262
</TABLE>
5. FEDERAL INCOME TAX INFORMATION (UNAUDITED)
For corporate shareholders, 42.9% of the income dividends and short-term capital
gain distributions paid by the Growth Fund in the fiscal year ended October 31,
1996 qualifies for the corporate dividend received deduction.
All of the distributions paid by the Municipal Bond Fund during the fiscal year
are exempt from federal income taxes.
18
<PAGE> 20
Financial Horizons Investment Trust
Independent Auditors' Report
The Shareholders and Board of Trustees of
The Financial Horizons Investment Trust:
We have audited the accompanying statements of assets and liabilities, including
the statements of investments, of The Financial Horizons Investment Trust --
Growth Fund, Municipal Bond Fund, Government Bond Fund, and Cash Reserve Fund,
as of October 31, 1996, and the related statements of operations, statements of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and the financial highlights are
the responsibility of the Trust'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 verification of securities owned as of
October 31, 1996, by confirmation with the custodian and other appropriate audit
procedures. 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 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 each
of the aforementioned funds comprising The Financial Horizons Investment Trust
as of October 31, 1996, the results of their operations, the changes in their
net assets and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
December 13, 1996
Columbus, Ohio
19
