FINANCIAL
HORIZONS
INVESTMENT TRUST
GROWTH FUND
MUNICIPAL BOND FUND
GOVERNMENT BOND FUND
CASH RESERVE FUND
1997
ANNUAL
REPORT
October 31, 1997
<PAGE>
CONTENTS
2............Message to Shareholders
3-4..........Growth Fund
5-6..........Municipal Bond Fund
7-8..........Government Bond Fund
9-10.........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
17-20........Notes to Financial Statements
21...........Independent Auditors' Report
TOLL-FREE TELEPHONE ASSISTANCE
General account service and exchanges:
1-800-848-0920
TRUSTEES
Dimon R. McFerson - Chairman
Columbus, Ohio
Dr. John C. Bryant
Cincinnati, Ohio
Robert M. Duncan
Columbus, Ohio
Dr. Thomas J. Kerr, IV
Westerville, Ohio
OFFICERS
James F. Laird, Jr. - Treasurer
Rae M. Pollina - Secretary
Craig A. Alvey - Assistant Treasurer
Charles S. Bath - Assistant Treasurer
Craig A. Carver - Assistant Treasurer
Christopher A. Cray - Assistant Treasurer
Edwin P. McCausland, Jr. - Assistant Treasurer
Peter Neckermann - Assistant Treasurer
Karen R. Tackett - 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, Dietrich, Reynolds &Koogler
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 registered federal service marks of
Nationwide(R) Life Insurance Company.
<PAGE>
OCTOBER 31, 1997
MESSAGE TO SHAREHOLDERS
Photo of: DIMON R. McFerson, Chairman
DIMON R. MCFERSON
CHAIRMAN
The year 1997 will be remembered as an exciting one for investors and our
shareholders.
Consumer confidence in the U.S. economy remains strong. The proportion of
customers rating business conditions as "good" rose, while the number of people
believing jobs are difficult to find fell.
A strong job market and wage gains helped consumers feel secure in handling a
mortgage, and record loan rates made them more affordable. As a result, August
marked the twentieth consecutive month of home sales above the 700,000 level,
the longest run in almost two decades.
In short, low inflation, high employment and strong levels of consumer
confidence have produced a strong market with record levels of consumer savings.
The third quarter saw a change in market leadership -- dependable blue-chip
multinationals weakened while thousands of small and mid-capitalization
companies, long overlooked, made strong gains. Eighty percent of di ver si fied
U.S. stock mutual funds outperformed the large-cap S&P 500 in the third quarter.
The period also was highlighted by volatility in the Asian markets, which caused
a brief drop in all international markets, but eventually demonstrated the U.S.
to be the most sought after investment arena.
The economy grew at an annual rate of 3.5% while inflation remained low.
The Dow Jones Industrial Average broke through the 8,000 mark and continued to
reach more all-time highs during the third quarter. A correction toward the end
of the quarter caused the market to close at 7,442.08 on October 31.
The continued strength of the market overall re in forces the importance of
realistic expectations and a long-term investment strategy. Since the 1987
crash, for example, the Dow Jones has risen more than 5,500 points.
For the year ended October 31, 1997, the Financial Horizons Growth Fund gained
23.66% (without sales charge) as compared to 32.10% for its benchmark index, the
S&P 500.
Returns on long-term municipal bonds were also strong. For the year ended
October 31, 1997, the Financial Horizons Municipal Bond Fund returned 8.37%
(without sales charge), while the Lehman Brothers Municipal Bond Index, its
benchmark, returned 8.49%.
For the year ended October 31, 1997, the Financial Horizons Government Bond Fund
returned 8.84% (without sales charge) com pared to 8.67% for its benchmark
index, the Merrill Lynch Government Master Index.
The Financial Horizons Cash Reserve Fund con tin ues to post con sis tent
yields. Total return for the Fund was 4.93% for the year ended October 31, 1997.
(There is no sales charge in this Fund.)
The Board of Trustees has scheduled a special meeting of shareholders for
February 16, 1998, to consider an important proposal affecting your funds. This
proposal is described in detail in the Combined Prospectus/Proxy Statement which
you will soon receive.
The proposal would reorganize the Financial Horizons Investment Trust (FHIT)
funds into a new Ohio business trust, the Nationwide Investing Foundation
III("New Trust"), along with several other Nationwide-managed funds. The New
Trust will provide for a revised fee structure, which includes changes in the
investment advisory fees of the funds, the establishment of a separate fee for
fund administration and the implementation of a schedule under which these fees,
as a percentage of assets, decrease as assets increase.
Your vote is very important to us.
Thank you for giving Nationwide Advisory Services, Inc. the opportunity to meet
your needs.
Sincerely,
DIMON R. MCFERSON, CHAIRMAN
<PAGE>
FINANCIAL HORIZONS INVESTMENT TRUST
GROWTH FUND
For the year ended October 31, 1997, the Financial Horizons Growth Fund had a
total return of 23.66% without sales charge, compared with 32.10% for the S&P
500 over the same period.
The sectors that performed best for the Fund this fiscal year included both drug
and financial stocks. Bergen Brunswig, a drug distributor which is currently the
object of a takeover proposal, had excellent returns, as did Schering-Plough,
Merrill Lynch and Banc One. Other individual names that did well included
Schlumberger, Lucent Technologies, Biomet, and HBO & Company. Unfortunately,
these sectors and names were not weighted heavily enough in the Fund to bring
overall results up to the benchmark levels. This Fund, as part of its strategy,
has also held a significant portion of its assets in small and mid-cap stocks.
These stocks did very poorly during the first four months of 1997, relative to
the S&P 500 index, and although they made a tremendous comeback after that, they
began to trail off again near the end of the fiscal year, and so, on balance,
proved to be a drag on results.
Since resuming management of the Fund in August, I have made several changes in
its strategic focus. The changes are oriented toward emphasizing growth stocks
to a greater extent, and pruning away at some of the less attractive,
value-oriented stocks the Fund holds. For example, the greatest concentration of
new investments has been in the Computer Services and Software sector. This
category represented about 5.6% of Fund assets at June 30, 1997, and as of
October 31, 1997, was up to 17.0%. I have added stocks such as Advent Software,
BMC Software, First Data Corp., Gartner Group, Radiant Systems and Template
Software. The common thread I am looking for in these stocks is that they all
sell products or services that help other businesses improve their own
productivity and efficiency, and that they are focused on solving their
customers' problems with efficient solutions that are difficult to obtain from
other sources.
I think that a more concentrated focus on growth, while retaining only the
best-positioned of the value-oriented Fund holdings will improve results over
time, and this will be the strategic thrust as we go forward.
JOHN M. SCHAFFNER, MBA, CFA - PORTFOLIO MANAGER
PORTFOLIO VALUE $9,599,817
FUND PERFORMANCE
Growth Fund Chart Data
Year.....GF.......S&P 500
1988.....10000....10000
1989.....10583....12563
1990.....8943.....11624
1991.....13118....15509
1992.....13830....17052
1993.....15847....19590
1994.....16944....20347
1995.....20598....25721
1996.....24594....31899
1997.....30413....42110
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 10/31/97.
* The S&P 500 is a capitalization-weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of these 500 stocks which represent all major
industries. Unlike the Growth Fund returns, the S&P 500 does not reflect any
fees, expenses or sales charges.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 10/31/97
1 YEAR 5 YEAR LIFE
Without sales charge..........23.66%.....17.07%....13.36%
With sales charge.............18.66%.....16.86%....13.36%
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 8.8 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.
<PAGE>
<TABLE>
FINANCIAL HORIZONS INVESTMENT TRUST GROWTH FUND -
STATEMENT OF INVESTMENTS - OCTOBER 31, 1997
<CAPTION>
SHARES SECURITY VALUE
<S> <C> <C>
COMMON STOCKS ( 96.8%)
BUSINESS SERVICES ( 8.4%)
4,000 ABR Information Services* $ 94,000
10,000 Alternative Resources Corp.* 247,500
7,500 American Business Information, Inc.,
Class A* 78,750
7,500 American Business Information, Inc.,
Class B* 97,500
5,500 Manpower, Inc. 211,063
10,000 TRO Learning, Inc.* 75,000
----------
803,813
----------
CHEMICALS (1.5%)
4,000 Sigma-Aldrich Corp. 140,500
----------
COMPUTER EQUIPMENT (2.9%)
4,000 American Power Conversion Corp.* 109,000
9,600 PAXAR Corp. 163,200
----------
272,200
----------
COMPUTER SERVICES AND SOFTWARE (17.0%)
5,000 Advent Software, Inc.* 127,500
4,000 BMC Software, Inc.* 241,500
10,000 First Data Corp. 290,625
10,000 Gartner Group, Inc.* 282,500
6,000 HBO & Co. 261,000
5,000 Radiant Systems 90,625
10,000 SPSS, Inc.* 225,000
10,000 Template Software, Inc.* 107,500
----------
1,626,250
----------
CONSUMER PRODUCTS (1.6%)
4,000 Newell Co. 153,500
----------
DENTAL (1.8%)
6,000 Dentsply International, Inc. 170,250
----------
DISTRIBUTION (2.5%)
5,906 Bergen Brunswig Corp., Class A 236,609
----------
DRUGS (8.8%)
4,000 Allergan, Inc. 131,750
3,800 Eli Lilly & Co. 254,125
8,000 Schering-Plough Corp. 448,500
----------
834,375
----------
ELECTRONICS (5.5%)
4,000 Intel Corp. 308,000
11,100 Woodhead Industries, Inc. 216,450
----------
524,450
----------
FINANCIAL (10.7%)
3,730 Banc One Corp. 194,426
4,500 Capital One Financial Corp. 205,312
5,500 Merrill Lynch & Co., Inc. 371,937
3,000 Silicon Valley Bancshares* 163,875
1,500 TCF Financial Corp. 85,313
----------
1,020,863
----------
FOOD-GRAIN & AGRICULTURE (3.4%)
10,758 Archer-Daniels-Midland Co. 239,365
5,500 Northland Cranberries Inc.,
Class A 84,906
----------
324,271
----------
<PAGE>
<CAPTION>
SHARES SECURITY VALUE
<S> <C> <C>
COMMON STOCKS (CONTINUED)
MACHINERY & CAPITAL GOODS (4.1%)
15,000 Sun Hydraulics Corp. $ 172,500
7,000 Zebra Technologies Corp.* 218,750
----------
391,250
----------
MEDICAL PRODUCTS AND SUPPLIES (5.2%)
5,000 Biomet, Inc. 124,687
5,000 Boston Scientific, Inc.* 227,500
13,000 Meridian Diagnostics, Inc. 143,000
----------
495,187
----------
MULTI-INDUSTRY (2.0%)
6,000 BMC Industries, Inc. 193,125
----------
OIL & GAS (5.1%)
1,300 Amoco Corp. 119,194
2,000 Royal Dutch Petroleum Co. 105,250
3,000 Schlumberger Ltd. 262,500
----------
486,944
----------
RETAIL (4.1%)
9,999 CUC International, Inc.* 294,970
5,000 Smart & Final, Inc. 100,938
----------
395,908
----------
TELECOMMUNICATIONS (12.2%)
9,333 360o Communications Co.* 197,160
9,100 Cincinnati Bell, Inc. 245,700
5,700 Commnet Cellular, Inc. 197,363
2,712 Lucent Technologies, Inc. 223,571
9,000 WorldCom, Inc.* 302,625
----------
1,166,419
----------
TOTAL COMMON STOCKS (cost $6,181,459) 9,235,914
----------
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (3.8%)
U.S.TREASURY BILLS
$ 365,000 4.77% through 5.06%,
11/13/97 through 12/11/97
(cost $363,798) 363,903
----------
TOTAL INVESTMENTS (cost $6,545,257) $9,599,817
==========
<FN>
- ----------
* 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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL HORIZONS INVESTMENT TRUST
MUNICIPAL BOND FUND
For the year ended October 31, 1997, the Bond Buyer 11 Index moved from a yield
of 5.60% to 5.28%. Municipal bonds underperformed Treasuries during the year.
The yield on the most current 30-year Treasury Bonds dropped from 6.65% to
6.15%. The Financial Horizons Municipal Bond Fund returned 8.37% without sales
charge, while the Lehman Brothers Municipal Bond Index returned 8.49%.
Net assets ended the year at $16.8 million. The Fund's average coupon was 5.83%
with average principal ma tu ri ty of 18 years. The Fund seeks to maximize
income by having a long maturity schedule while investing in high-quality issues
averaging "AA" credit quality.
As the year began, a Democratic President and a Republican Majority were
returned to Washington and the econ o my was growing at a slow and manageable
non inflationary pace. The markets reacted favorably to these events with
stable to declining interest rates. However, during the first quarter of the
calendar year, economic statistics began to show signs of an economy that may be
overheating, and on March 25, in a preemptive move against inflationary
concerns, the Federal Reserve raised the Federal funds rate 0.25%. The move
appeared to be justified as, during the months that followed, inflationary
measures remained remarkably tame. In late April the announcement of a
balanced budget agreement also overshadowed concerns about the growth rate.
During the latter part of October, the Equity markets experienced a sell-off
that prompted investors to a flight to quality into U.S. Treasury Securities.
This movement helped to sustain the lower yields and higher prices in the bond
markets. This volatility in the worldwide financial markets, however, has
significantly reduced the threat of another preemptive rate hike from the
Federal Reserve to slow the growth in U.S. economy.
Municipal issuers continued to take advantage of the lower interest rates and
propelled municipal volume up 17% for the first 10 months of the calendar year.
This increased supply has kept municipal securities from fully participating in
the bond market rally. As a consequence, particularly in the long end,
municipals have cheapened when compared to treasury securities.
ALPHA L. BENSON, MBA - PORTFOLIO MANAGER
PORTFOLIO VALUE $16,641,375
FUND PERFORMANCE
Municipal Bond Chart Data
Year.....MBF......LBMBI
1988.....10000....10000
1989.....10712....10909
1990.....11230....11719
1991.....12691....13145
1992.....13523....14249
1993.....15847....16254
1994.....14244....15546
1995.....16309....17854
1996.....17078....18872
1997.....18508....20475
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* (LBMBI) over the period since inception ended 10/31/97.
* The LBMBI consists of investment grade tax-exempt bonds and includes
securities with at least one year to maturity and at least $100 million in
par value outstanding. Unlike the Municipal Bond Fund returns, the LBMBI does
not reflect any fees, expenses or sales charges.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 10/31/97
1 YEAR 5 YEAR LIFE
Without sales charge...........8.37%......6.48%.....7.19%
With sales charge..............3.37%......6.16%.....7.19%
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 8.8 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.
<PAGE>
<TABLE>
FINANCIAL HORIZONS INVESTMENT TRUST MUNICIPAL BOND FUND
- - STATEMENT OF INVESTMENTS - OCTOBER 31, 1997
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES (98.9%)
ALABAMA (6.3%)
$1,000,000 Birmingham, Alabama General
Obligation Refunding Bonds,
Series 1992-B,
6.25%, 04/01/16 $ 1,061,250
-----------
FLORIDA (5.9%)
1,000,000 Orlando, Florida Utilities Commission
Water and Electric Subordinated
Revenue Refunding Bonds,
Series 1993-A, 5.25%, 10/01/14 986,250
-----------
ILLINOIS (18.4%)
1,000,000 Chicago, Illinois Park District General
Obligation Unlimited Bonds,
5.60%, 01/01/21 1,012,500
1,000,000 Illinois Housing Development Authority
Homeowner Mortgage Revenue
Bonds, Series 1994-A-1,
6.45%, 08/01/17 1,063,750
1,000,000 Illinois Regional Transportation Authority,
General Obligation Refunding Bonds,
Series 1996, 5.40%, 06/01/15 1,015,000
-----------
3,091,250
-----------
NEVADA (6.0%)
1,000,000 Nevada State General Obligation,
Nevada Municipal Bond Bank Project,
Numbers 49 & 50,
5.50%, 11/01/16 1,017,500
-----------
NEW JERSEY (6.6%)
1,000,000 New Jersey Turnpike Authority Turnpike
Revenue Bonds, Series 1991-C,
6.50%, 01/01/16 1,118,750
-----------
NEW YORK (6.5%)
1,000,000 New York Local Government Assistance
Corporation, Refunding Bonds,
Series 1993-E, 6.00%, 04/01/14 1,088,750
-----------
NORTH CAROLINA (6.3%)
1,000,000 Charlotte-Mecklenburg Hospital Authority,
North Carolina Health Care System
Revenue Bonds, Series 1992,
6.25%, 01/01/20 1,058,750
-----------
SOUTH CAROLINA (6.2%)
1,000,000 South Carolina State Housing Finance &
Development Authority Homeownership
Mortgage Purchase Bonds,
Series 1994-A,
6.375%, 07/01/16 1,048,750
-----------
TENNESSEE (1.3%)
200,000 Nashville & Davidson County, Tennessee
General Obligation Multi-Purpose
Improvement Bonds, Series 1994,
6.125%, 05/15/14 218,250
-----------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES (CONTINUED)
TEXAS (17.8%)
$1,000,000 Carrollton - Farmers Branch Independent
School District, Texas General Obligation
School Building Unlimited Tax Bonds,
Series 1995, 5.00%, 02/15/16 $ 971,250
1,000,000 Grand Prairie Independent School District,
Texas General Obligation Unlimited Tax
School Building and Refunding Bonds,
Series 1996, 5.20%, 02/15/17 988,750
1,000,000 Texas State Public Finance Authority
Building Revenue Refunding,
Series 1992-B, 5.75%, 02/01/12 1,027,500
-----------
2,987,500
-----------
UTAH (6.1%)
1,000,000 Utah Housing Finance Agency,
Multi-Family Housing Revenue
Refunding Bonds, (Cottonwood
Apartments Project), Issue 1995,
6.30%, 07/01/15 1,027,500
-----------
VIRGINIA (5.6%)
900,000 Virginia Housing Development Authority
Commonwealth Mortgage Bonds, Series
1992-C, Subseries C-7,
6.30%, 01/01/15 939,375
-----------
WASHINGTON (5.9%)
1,000,000 Seattle, Washington Limited Tax, General
Obligation Bonds, Series 1995,
5.125%, 07/01/15 997,500
-----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(cost $16,066,278) $16,641,375
===========
<FN>
- -----------
Cost also represents cost for federal income tax purposes. Portfolio holding
percentages represent market value as a percentage of net assets.
</FN>
See accompanying notes to financial statements.
Distribution of investments by industry, as a percentage of total investment in
securities at value, is as follows:
<CAPTION>
INDUSTRY MARKET VALUE PERCENT
<S> <C> <C>
County/City/School Districts $ 1,960,000 11.8%
Hospitals 1,058,750 6.4
Housing 4,079,375 24.5
Miscellaneous 3,128,750 18.8
Political Subdivisions - City/County 2,277,000 13.7
State Territories and Possessions 1,017,500 6.1
Transportation 2,133,750 12.8
Water, Sewer, and Combined Utilities 986,250 5.9
----------- -----
$16,641,375 100.0%
=========== =====
</TABLE>
<PAGE>
FINANCIAL HORIZONS INVESTMENT TRUST
GOVERNMENT BOND FUND
The Financial Horizons Investment Trust Government Bond Fund's total return for
the year ended October 31, 1997, was 8.84%, without sales charge and assuming
all distributions were reinvested, while the Merrill Lynch Government Master
Index returned 8.67%.
Shareholders who stayed in the Fund for the entire period were rewarded after a
difficult first six months when intermediate-term interest rates rose 0.4%-0.5%.
The second half of the period was more favorable as these interest rates
dropped 0.5%-0.9% and longer rates dropped by approximately 0.8%.
The higher prices for bonds in the second half were the result of several
factors. The most notable factor was the continued release of favorable
inflation reports in spite of low unemployment and significant growth in the
overall economy. Another important factor has been the perception that the
Federal Reserve will not act to raise rates until clear signs of inflationary
pressures are present. The Federal Reserve's stance combined with favorable in
fla tion reports has led to a significantly flatter yield curve. Finally, the
U.S. government market has been the beneficiary of a flight to quality as
the result of increased turmoil in world equity markets.
The Government Bond Fund benefited from its weighting in the Collateralized
Mortgage Obligation (CMO) market during the period and the shift out of callable
into non-callable Agency notes. Approximately 62% of portfolio assets are
invested in Treasury and Agency notes, and 35% of Fund assets are invested in
the CMO market. The remainder of portfolio assets are in repurchase agreements.
PORTFOLIO MANAGERS:
KIMBERLY A. BINGLE, CFA, FLMI
WAYNE T. FRISBEE, CFA
GARY R. HUNT, MBA
PORTFOLIO VALUE $48,642,767
FUND PERFORMANCE
Government Bonds Chart Data
Year.....GBF......MLGMI
1988.....10000....10000
1989.....11181....11287
1990.....11955....11958
1991.....13897....13708
1992.....15416....15459
1993.....17074....17469
1994.....16263....16713
1995.....18976....19289
1996.....19926....20262
1997.....21687....22020
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* (MLGMI) over the period since inception ended 10/31/97.
*The MLGMI is comprised of U.S. Treasury notes and bonds with one or more
years remaining to final maturity and at least $1 billion in face value
outstanding, and U.S. agencies with one or more years remaining to final
maturity and at least $100 million in face value outstanding. Unlike the
Government Bond Fund returns, the MLGMI does not reflect any fees, expenses or
sales charges.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 10/31/97
1 YEAR 5 YEAR LIFE
Without sales charge...........8.84%......7.06%.....9.12%
With sales charge..............3.84%......6.76%.....9.12%
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 8.8 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.
<PAGE>
<TABLE>
FINANCIAL HORIZONS INVESTMENT TRUST GOVERNMENT BOND FUND
- - STATEMENT OF INVESTMENTS - OCTOBER 31, 1997
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
MORTGAGE BACKED SECURITIES (35.2%)
$ 2,000,000 FHLMC (REMIC) Series 1313-G,
7.25%, 06/15/07 $ 2,052,398
3,000,000 FHLMC (REMIC) Series 1344-D,
6.00%, 8/15/07 2,925,540
1,289,219 FHLMC (REMIC) Series 31-E,
7.55%, 5/15/20 1,338,901
572,259 FHLMC (REMIC) Series 190-D,
9.20%, 10/15/21 609,924
3,828,569 FNMA (REMIC) Series 92-126,
8.00%, 07/25/02 3,986,038
338,324 FNMA (REMIC) Series 1989-86,
8.75%, 11/25/19 358,046
1,444,299 FNMA (REMIC) Series 90-7-B,
8.50%, 01/25/20 1,516,784
3,382,323 FNMA (REMIC) Series 1990-16D,
9.00%, 03/25/20 3,524,959
747,318 FNMA (REMIC) Series 1991-73A,
8.00%, 07/25/21 774,758
-----------
TOTAL MORTGAGE BACKED SECURITIES
(cost $16,425,777) 17,087,348
-----------
U.S. GOVERNMENT AND AGENCY
LONG-TERM OBLIGATIONS (62.3%)
4,000,000 Federal Home Loan Banks,
6.36%, 3/21/01 4,059,588
3,000,000 Federal National Mortgage Assoc.,
7.65%, 03/10/05 3,272,094
1,000,000 Federal National Mortgage Assoc.,
7.26%,10/05/05 1,005,379
15,000,000 Resolution Funding STRIPS,
0.00%, 04/15/06 9,038,835
10,000,000 Resolution Funding STRIPS,
0.00%, 07/15/13 3,717,590
3,000,000 U.S. Treasury Note,
5.625%, 11/30/00 2,991,561
6,000,000 U.S. Treasury Note,
6.625%, 07/31/01 6,174,372
-----------
TOTAL U.S. GOVERNMENT AND AGENCY LONG-TERM OBLIGATIONS
(cost $28,631,433) 30,259,419
-----------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
REPURCHASE AGREEMENT (2.7%)
$1,296,000 UBS Securities, 5.63%, 11/03/97,
Collateralized by $1,279,000 U.S.
Treasury Note, 6.375%, 01/15/00,
market value $1,322,166
(cost $1,296,000) $ 1,296,000
------------
TOTAL INVESTMENTS (cost $46,353,210) $ 48,642,767
============
<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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL HORIZONS INVESTMENT TRUST
CASH RESERVE FUND
At October 31, 1997, the Financial Horizons Cash Reserve Fund had net assets of
$4.1 million with an average maturity of 20 days.
The Financial Horizons Cash Reserve Fund continued to invest in only first-tier
money market instruments. At October 31, 1997, commercial paper accounted for
94% of the port fo lio, followed by U.S. Government/Agency securities at 6%. The
highest portfolio weightings were in those segments which have a favorable yield
advantage including banking, consumer sales/finance and the broker/dealer
industries. These segments accounted for 14%, 11%, and 11% of the portfolio,
respectively.
A credit review is completed on all issuers prior to investment. The yield on
the Fund remained competitive with its peer average for the fiscal-year
period. The seven-day effective yield at October 31, 1997, was 4.85%.
This year marked the seventh year of expansion for the U.S. economy. Growth for
the third quarter was 3.5% compared to a Federal Reserve (Fed) target of 2.5%.
Economists are surprised that inflationary pressures have not developed,
particularly with such a high growth rate coupled with low unemployment. The
Federal Open Market Committee raised interest rates in March 1997 by increasing
the Fed funds rate to 5.50% from 5.25%. This was the first increase since
January 1996.
KAREN G. MADER, MA - PORTFOLIO MANAGER
PORTFOLIO VALUE $4,053,700
FUND PERFORMANCE
Cash Reserves Chart Data
Year.....CRF......CPI
1988.....10000....10000
1989.....10659....10389
1990.....11392....11051
1991.....11993....11365
1992.....12361....11738
1993.....12614....12061
1994.....12999....12384
1995.....13703....12723
1996.....14384....13104
1997.....15094....13377
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* (CPI) over the period since inception ended 10/31/97.
* The CPI represents changes in prices of all goods and services purchased for
consumption by urban households. Unlike the Cash Reserve Fund returns, the
CPI does not reflect any fees or expenses.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED 10/31/97
1 YEAR 5 YEAR LIFE
Without sales charge*..........4.93%......4.08%.....4.75%
*There are no sales charges in the Financial Horizons Investment Trust Cash
Reserve Fund. These results include reinvestment of all dividends and capital
gains distributions. The life of the fund is 8.8 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.
<PAGE>
<TABLE>
FINANCIAL HORIZONS INVESTMENT TRUST CASH RESERVE FUND
- - STATEMENT OF INVESTMENTS - OCTOBER 31, 1997
<CAPTION>
PRINCIPAL SECURITY VALUE
<S> <C> <C>
COMMERCIAL PAPER (94.3%)
AGRICULTURE/FINANCE (2.9%)
$ 116,000 John Deere Capital Corp.,
5.48%, 11/26/97 $ 115,559
----------
AUTO/FINANCE (4.0%)
160,000 Ford Motor Credit Co., 5.49%, 11/07/97 159,854
----------
BANKS (14.1%)
132,000 Corestates Capital Corp., 5.51%, 11/03/97 131,959
122,000 J.P. Morgan & Co., 5.49%, 11/21/97 121,628
160,000 National City Credit Corp., 5.51%, 12/09/97 159,069
160,000 SunTrust Banks, Inc., 5.53%, 11/20/97 159,533
----------
572,189
----------
BROKER/DEALERS (10.9%)
140,000 Bear Stearns Company, 5.52%, 12/08/97 139,206
142,000 Goldman Sachs Group, 5.50%, 11/14/97 141,718
162,000 Merrill Lynch & Co. Inc., 5.50%, 11/03/97 161,951
----------
442,875
----------
CHEMICALS (3.2%)
130,000 PPG Industries Inc., 5.47%, 11/24/97 129,546
----------
CONSUMER SALES/FINANCE (10.6%)
156,000 American Express Credit Corp.,
5.49%, 12/01/97 155,286
160,000 Commercial Credit Co., 5.51%, 11/12/97 159,731
116,000 Norwest Financial Inc., 5.51%, 11/03/97 115,964
----------
430,981
----------
DATA SERVICES (4.0%)
162,000 First Data Corp., 5.51%, 12/09/97 161,058
----------
DIVERSIFIED FINANCE (3.5%)
144,000 GE Capital Corp., 5.50%, 12/03/97 143,296
----------
ENTERTAINMENT (3.7%)
150,000 Walt Disney Co., 5.50%, 11/04/97 149,931
----------
FINANCIAL SERVICES/UTILITIES (4.0%)
163,000 National Rural Utilities Cooperative,
5.50%, 11/18/97 162,577
----------
HEAVY EQUIPMENT/FINANCE (3.7%)
150,000 Caterpillar Financial Services Inc.,
5.50%, 11/18/97 149,610
----------
INSURANCE (2.4%)
100,000 MetLife Funding Inc., 5.49%, 12/09/97 99,420
----------
OFFICE EQUIPMENT & SUPPLIES (3.7%)
150,000 Pitney Bowes Credit Corp.,
5.54%, 12/02/97 149,284
----------
PACKAGING & CONTAINERS (3.7%)
150,000 Bemis Company, Inc., 5.52%, 11/17/97 149,632
----------
<PAGE>
<CAPTION>
PRINCIPAL SECURITY VALUE
COMMERCIAL PAPER (CONTINUED)
PAPER & FOREST PRODUCTS (3.7%)
$ 150,000 Sonoco Products Co., 5.48%, 11/18/97 $ 149,612
----------
PHARMACEUTICALS & PERSONAL CARE (9.3%)
140,000 Abbott Laboratories, 5.46%, 11/12/97 139,766
110,000 Becton Dickinson & Co., 5.52%, 11/07/97 109,899
126,000 Schering Corp., 5.50%, 11/05/97 125,923
----------
375,588
----------
PREMIUM FINANCE (3.9%)
160,000 A.I. Credit Corp., 5.53%, 01/13/98 158,206
----------
TELEPHONE SERVICES (3.0%)
120,000 Ameritech Corp., 5.50%, 11/17/97 119,707
----------
TOTAL COMMERCIAL PAPER (cost $3,818,925) 3,818,925
----------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (5.8%)
85,000 U.S. Treasury Bill, 4.77%, 11/13/97 84,865
150,000 Federal Home Loan Mortgage Corp.,
5.38%, 11/05/97 149,910
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $234,775) 234,775
----------
TOTAL INVESTMENTS (cost $4,053,700) $4,053,700
==========
<FN>
- -----------
Cost also represents cost for federal income tax purposes. Portfolio holding
percentages represent value as a percentage of net assets.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
AT OCTOBER 31, 1997
<CAPTION>
MUNICIPAL GOVERNMENT CASH
GROWTH BOND BOND RESERVE
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost $6,545,257, $16,066,278, $46,353,210
and $4,053,700, respectively) $ 9,599,817 $ 16,641,375 $ 48,642,767 $ 4,053,700
Cash -- -- 5,267 2,390
Receivable for Fund shares sold 22,411 200 -- --
Receivable for investment securities sold -- 222,493 13,778 --
Accrued interest and dividends receivable 3,104 261,276 343,800 --
------------ ------------ ------------ ------------
TOTAL ASSETS 9,625,332 17,125,344 49,005,612 4,056,090
LIABILITIES
Bank loan 69,957 210,307 -- --
Payable for Fund shares redeemed -- 42,339 270,849 134
Payable for investment securities purchased -- -- -- --
Accrued management fees 5,726 9,774 26,825 1,379
Accrued transfer agent fees 983 980 3,605 149
Dividends payable -- 30,222 123,965 1,206
Other accrued expenses 7,959 10,275 31,487 2,433
------------ ------------ ------------ ------------
TOTAL LIABILITIES 84,625 303,897 456,731 5,301
------------ ------------ ------------ ------------
NET ASSETS $ 9,540,707 $ 16,821,447 $ 48,548,881 $ 4,050,789
============ ============ ============ ============
NET ASSETS REPRESENTED BY:
Capital Shares, $1 par value, outstanding $ 417,133 $ 1,513,368 $ 4,338,857 $ 4,050,907
Capital paid in excess of par value 4,296,824 15,524,635 43,130,161 (113)
Net unrealized appreciation 3,054,560 575,097 2,289,557 --
Accumulated undistributed net realized gain (loss) 1,768,865 (791,653) (1,210,831) (5)
Accumulated undistributed net investment income 3,325 -- 1,137 --
------------ ------------ ------------ ------------
NET ASSETS $ 9,540,707 $ 16,821,447 $ 48,548,881 $ 4,050,789
============ ============ ============ ============
Shares outstanding (unlimited number of shares authorized) 417,133 1,513,368 4,338,857 4,050,907
============ ============ ============ ============
NET ASSET VALUE AND OFFERING PRICE PER SHARE* $ 22.87 $ 11.12 $ 11.19 $ 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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<CAPTION>
MUNICIPAL GOVERNMENT CASH
GROWTH BOND BOND RESERVE
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
INCOME:
Dividends $ 79,726 $ -- $ -- $ --
Interest 34,405 1,069,550 3,538,447 234,362
Other -- -- 102,078 --
----------- ----------- ----------- -----------
Total income 114,131 1,069,550 3,640,525 234,362
EXPENSES:
Distribution fees 73,712 139,464 396,061 --
Investment management fees 63,883 121,837 343,259 17,011
Transfer agent fees 11,300 11,000 41,500 1,001
Professional services 3,014 5,870 18,132 1,235
Registration fees 3,051 3,510 6,005 2,164
Shareholders' reports 5,900 5,000 18,100 811
Custodian fees 3,400 7,000 7,500 6,040
Trustee fees and expenses 1,601 3,323 9,530 705
Other 1,223 466 4,497 325
----------- ----------- ----------- -----------
Total expenses before waived expenses 167,084 297,470 844,584 29,292
Total waived expenses (72,700) (137,225) (396,061) --
----------- ----------- ----------- -----------
Net expenses 94,384 160,245 448,523 29,292
----------- ----------- ----------- -----------
NET INVESTMENT INCOME $ 19,747 $ 909,305 $ 3,192,002 $ 205,070
=========== =========== =========== ===========
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 1,768,865 $ 159,282 $ 90,839 $ 1
Net change in unrealized appreciation of investments 366,366 416,404 1,031,295 --
----------- ----------- ----------- -----------
Net realized and unrealized gain on investments 2,135,231 575,686 1,122,134 1
----------- ----------- ----------- -----------
NET INCREASE IN ASSETS RESULTING FROM OPERATIONS $ 2,154,978 $ 1,484,991 $ 4,314,136 $ 205,071
=========== =========== =========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
GROWTH FUND MUNICIPAL BOND FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 19,747 $ 2,285 $ 909,305 $ 1,051,197
Net realized gain on investments 1,768,865 456,661 159,282 249,540
Net change in unrealized appreciation (depreciation)
of investments 366,366 995,019 416,404 (275,812)
---------------------------- ----------------------------
Net increase in net assets resulting from operations 2,154,978 1,453,965 1,484,991 1,024,925
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (14,409) -- (909,305) (1,051,197)
In excess of net investment income -- -- -- (301)
Net realized gain from investment transactions (455,746) (819,732) -- --
---------------------------- ----------------------------
Decrease in net assets from distributions to shareholders (470,155) (819,732) (909,305) (1,051,498)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 509,644 896,371 127,500 83,672
Net asset value of shares issued to shareholders from
reinvestment of dividends 464,389 806,112 531,645 617,827
Cost of shares redeemed (2,213,453) (835,073) (4,913,234) (5,980,992)
---------------------------- ----------------------------
Increase (decrease) in net assets derived from capital
share transactions (1,239,420) 867,410 (4,254,089) (5,279,493)
---------------------------- ----------------------------
NET INCREASE (DECREASE) IN NET ASSETS 445,403 1,501,643 (3,678,403) (5,306,066)
NET ASSETS - BEGINNING OF PERIOD 9,095,304 7,593,661 20,499,850 25,805,916
---------------------------- ----------------------------
NET ASSETS - END OF PERIOD $ 9,540,707 $ 9,095,304 $ 16,821,447 $ 20,499,850
============================ ============================
Undistributed net realized gain (loss) on investments
included in net assets at end of period $ 1,768,865 $ 458,096 $ (791,653) $ (950,935)
============================ ============================
Undistributed (distributions in excess of) net
investment income included in net assets at end of period $ 3,325 $ (4,363) $ -- $ (301)
---------------------------- ----------------------------
SHARE ACTIVITY:
Shares sold 24,523 48,331 11,782 7,850
Reinvestment of dividends 24,012 46,328 48,845 57,620
Shares redeemed (98,638) (45,321) (450,753) (559,944)
============================ ============================
Net increase (decrease) in number of shares (50,103) 49,338 (390,126) (494,474)
============================ ============================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
GOVERNMENT BOND FUND CASH RESERVE FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 3,192,002 $ 3,989,258 $ 205,070 $ 202,483
Net realized gain (loss) on investments 90,839 746,770 1 (3)
Net change in unrealized appreciation (depreciation)
of investments 1,031,295 (1,785,043) -- --
---------------------------- ----------------------------
Net increase in net assets resulting from operations 4,314,136 2,950,985 205,071 202,480
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,191,909) (3,988,214) (205,070) (202,483)
In excess of net investment income -- -- -- (8)
Paid in capital -- -- -- (105)
---------------------------- ----------------------------
Decrease in net assets from distributions to shareholders (3,191,909) (3,988,214) (205,070) (202,596)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 362,854 452,449 162,276 280,277
Net asset value of shares issued to shareholders from
reinvestment of dividends 1,610,983 2,053,433 189,391 186,091
Cost of shares redeemed (13,283,912) (11,921,797) (543,630) (373,733)
---------------------------- ----------------------------
Increase (decrease) in net assets derived from capital
share transactions (11,310,075) (9,415,915) (191,963) 92,635
---------------------------- ----------------------------
NET INCREASE (DECREASE) IN NET ASSETS (10,187,848) (10,453,144) (191,962) 92,519
NET ASSETS - BEGINNING OF PERIOD 58,736,729 69,189,873 4,242,751 4,150,232
---------------------------- ----------------------------
NET ASSETS - END OF PERIOD $ 48,548,881 $ 58,736,729 $ 4,050,789 $ 4,242,751
============================ ============================
Undistributed net realized loss on investments
included in net assets at end of period $ (1,210,831) $ (1,301,670) $ (5) $ (6)
============================ ============================
Undistributed (distributions in excess of) net
investment income included in net assets at end of period $ 1,137 $ 1,044 $ -- $ (8)
============================ ============================
SHARE ACTIVITY:
Shares sold 33,267 40,874 162,276 280,277
Reinvestment of dividends 147,681 188,895 189,391 186,091
Shares redeemed (1,218,791) (1,101,948) (543,630) (373,733)
---------------------------- ----------------------------
Net increase (decrease) in number of shares (1,037,843) (872,179) (191,963) 92,635
============================ ============================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<CAPTION>
GROWTH FUND MUNICIPAL BOND FUND
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE--
BEGINNING OF PERIOD $19.47 $18.17 $15.11 $14.17 $12.46 $10.77 $10.76 $ 9.86 $11.75 $10.64
Net investment income (loss) 0.04 0.01 (0.01) 0.03 0.08 0.53 0.48 0.50 0.49 0.56
Net realized gain (loss) and
unrealized appreciation
(depreciation) 4.38 3.28 3.23 0.95 1.73 0.35 0.01 0.90 (1.62) 1.22
----------------------------------------- -----------------------------------------
Total from investment operations 4.42 3.29 3.22 0.98 1.81 0.88 0.49 1.40 (1.13) 1.78
Dividends from net
investment income (0.03) -- -- (0.04) (0.10) (0.53) (0.48) (0.50) (0.49) (0.56)
Distributions in excess of net
investment income -- -- (0.01) -- -- -- -- -- -- --
Distributions from net realized
gain on investment transactions (0.99) (1.99) (0.15) -- -- -- -- -- (0.27) (0.11)
----------------------------------------- -----------------------------------------
Total distributions (1.02) (1.99) (0.16) (0.04) (0.10) (0.53) (0.48) (0.50) (0.76) (0.67)
----------------------------------------- -----------------------------------------
Net increase (decrease) in net
asset value 3.40 1.30 3.06 0.94 1.71 0.35 0.01 0.90 (1.89) 1.11
----------------------------------------- -----------------------------------------
NET ASSET VALUE--
END OF PERIOD $22.87 $19.47 $18.17 $15.11 $14.17 $11.12 $10.77 $10.76 $ 9.86 $11.75
========================================= =========================================
Total return (excluding
sales charges) 23.66% 19.41% 21.57% 6.92% 14.59% 8.37% 4.72% 14.50% (10.11%) 17.18%
Net assets, end of period (000) $9,541 $9,095 $7,594 $6,787 $5,165 $16,821 $20,500 $25,806 $26,412 $25,828
Ratio of expenses to average
net assets 0.96% 1.44% 1.47% 1.59% 1.44% 0.85% 1.36% 1.35% 1.27% 1.01%
Ratio of expenses to average
net assets* 1.70% 1.69% 1.72% 1.90% 2.03% 1.59% 1.61% 1.60% 1.57% 1.61%
Ratio of net investment income
(loss) to average net assets 0.20% 0.03% (0.05%) 0.21% 0.63% 4.85% 4.53% 4.82% 4.58% 4.81%
Ratio of net investment income
(loss) to average net assets* (0.54%) (0.22%) (0.30%) (0.82%) 0.05% 4.11% 4.28% 4.57% 4.28% 4.11%
Portfolio turnover 40.69% 17.19% 29.19% 14.14% 12.98% 14.09% 38.80% 60.79% 69.67% 46.95%
Average commission rate paid** 5.8006(cent) 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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
<CAPTION>
GOVERNMENT BOND FUND CASH RESERVE FUND
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE--
BEGINNING OF PERIOD $10.92 $11.07 $10.12 $11.31 $11.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.66 0.68 0.68 0.58 0.63 0.05 0.05 0.05 0.03 0.02
Net realized gain (loss) and
unrealized appreciation
(depreciation) 0.27 (0.15) 0.95 (1.10) 0.50 -- -- -- -- --
----------------------------------------- -----------------------------------------
Total from investment operations 0.93 0.53 1.63 (0.52) 1.13 0.05 0.05 0.05 0.03 0.02
Dividends from net
investment income (0.66) (0.68) (0.68) (0.58) (0.66) (0.05) (0.05) (0.05) (0.03) (0.02)
Distributions from net realized
gain from investment transactions -- -- -- (0.09) (0.16) -- -- -- -- --
----------------------------------------- -----------------------------------------
Total distributions (0.66) (0.68) (0.68) (0.67) (0.82) (0.05) (0.05) (0.05) (0.03) (0.02)
----------------------------------------- -----------------------------------------
Net increase (decrease) in net
asset value 0.27 (0.15) 0.95 (1.19) 0.31 -- -- -- -- --
----------------------------------------- -----------------------------------------
NET ASSET VALUE--
END OF PERIOD $11.19 $10.92 $11.07 $10.12 $11.31 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========================================= =========================================
Total return (excluding
sales charges) 8.84% 5.01% 16.68% (4.75%) 10.76% 4.93% 4.97% 5.41% 3.08% 2.05%
Net assets, end of period (000) $48,549 $58,737 $69,190 $70,218 $84,602 $4,051 $4,243 $4,150 $3,950 $2,788
Ratio of expenses to average
net assets 0.85% 0.84% 0.89% 1.28% 1.00% 0.69% 0.65% 0.65% 0.84% 1.17%
Ratio of expenses to average
net assets* 1.60% 1.59% 1.58% 1.58% 1.61% 0.69% 0.65% 0.65% 1.06% 2.20%
Ratio of net investment income
average net assets 6.04% 6.26% 6.42% 5.42% 5.55% 4.82% 4.86% 5.29% 3.14% 2.04%
Ratio of net investment income
to average net assets* 5.29% 5.51% 5.73% 5.12% 4.93% 4.82% 4.86% 5.29% 2.92% 0.79%
Portfolio turnover 52.10% 21.04% 140.55% 174.40% 143.63% -- -- -- -- --
<FN>
* Ratios calculated as if no expenses were waived.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
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
the last quoted sale price, or if no sale, at the prior day's
valuation as provided by an independent pricing agent. Securities
traded in the over-the-counter (OTC) market are valued at the last
quoted sale price, or if no sale, the quoted bid price. U.S.
Government securities are valued at the quoted bid price. Bonds are
valued by a combination of daily quotes and matrix evaluations.
Securities for which reliable market quotations are not available,
or for which an independent pricing agent does not provide a value
or provides a value that does not represent fair value in the
judgment of the Fund's investment adviser, are valued at fair value
in accordance with procedures authorized by the Boards of Trustees.
(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.
The value of a repurchase agreement generally equals the purchase
price paid by the Fund (cost) plus the interest accrued to date. The
seller, under the repurchase agreement, is required to maintain the
market value of the underlying collateral at not less than the value
of the repurchase agreement. Securities subject to repurchase
agreements are held by the Federal Reserve/Treasury book-entry
system or by the Fund's custodian or an approved sub-custodian.
(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 amortization
of premium and discount where applicable, is recorded on an accrual basis.
(C) FEDERAL INCOME TAXES
Each Fund'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. To the extent net
realized gains are offset through the application of a capital loss
carryover, they will not be distributed to shareholders but will be
retained by that Fund.
As of October 31, 1997, the Municipal and Government Bond funds had net
capital loss carry forwards of $791,653 and $1,210,831 respectively,
available to offset future capital gains, which will expire in 5 to 6
years.
(D) DIVIDENDS TO SHAREHOLDERS
(1) Growth Fund:
Dividends from net investment income are paid semi-annually and are
recorded on the ex-dividend date.
(2) Municipal Bond Fund, Government Bond Fund, and Cash Reserve Fund:
Dividends from net investment income 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, 1997, undistributed net investment income,
undistributed net realized gains and capital paid in excess of par value
have been adjusted. Negative amounts represent credits and positive
amounts represent debits. The adjustments are as follows:
<TABLE>
<CAPTION>
CAPITAL PAID IN
UNDISTRIBUTED NET UNDISTRIBUTED NET EXCESS OF
INVESTMENT INCOME REALIZEDGAINS PAR VALUE
<S> <C> <C> <C>
Growth Fund $(2,350) $2,350 $ --
Municipal Bond Fund (301) -- 301
Cash Reserve Fund (8) -- 8
</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.
(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
assets 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, 1997, NAS
waived distribution fees for the Growth, Municipal Bond and Government Bond
funds totaling $72,700, $137,225, and $396,061, respectively, or $.155, $.080
and $.082 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, 1997, NAS received
fees of $10,832, $41,532 and $23,417 on the Growth, Municipal Bond and
Government Bond funds, respectively. Additionally, the Government Bond Fund
retained fees (CDSC) of $102,078 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. BANK LOANS
The Trust has an unsecured bank line of credit of $6,000,000 for overdraft
protection and temporary emergency borrowing purposes. Borrowings under this
arrangement bear interest at the Federal funds rate plus .50%. These interest
costs are included in custodian fees in the statements of operations. No
compensating balances are required.
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, 1997, are summarized as follows:
<TABLE>
<CAPTION>
U.S. GOVT.
SECURITIES OBLIGATIONS
PURCHASES SALES PURCHASES SALES
<S> <C> <C> <C> <C>
Growth Fund $3,705,184 $4,960,110 $ 2,083,554 $ 2,335,124
Municipal Bond Fund 2,611,428 6,686,252 -- --
Government Bond Fund -- 3,046,275 25,533,599 27,887,893
Cash Reserve Fund -- -- 1,629,665 1,596,000
</TABLE>
Realized gains and losses have been computed on the specific identification
basis. Included in net unrealized appreciation at October 31, 1997, are the
following components:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
<S> <C> <C> <C>
Growth Fund $3,250,075 $(195,515) $3,054,560
Municipal Bond Fund 590,417 (15,320) 575,097
Government Bond Fund 2,289,557 -- 2,289,557
</TABLE>
5. FEDERAL INCOME TAX INFORMATION (UNAUDITED)
For corporate shareholders, 100% of the income dividends paid by the Growth Fund
in the fiscal year ended October 31, 1997, 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.
6. SUBSEQUENT EVENT
At a meeting of the Board of Trustees on November 7, 1997, the Board authorized
a Special Meeting of Shareholders to be held on February 16, 1998. At this
Special Meeting, shareholders are being asked to approve an Agreement and Plan
of Reorganization between Financial Horizons Investment Trust and Nationwide
Investing Foundation III ("New Trust"), at which time Nationwide Investing
Foundation and Nationwide Investing Foundation II will also reorganize into the
New Trust. The transactions contemplated thereby pending shareholder approval
include the following:
(a) The transfer of the net assets of the Financial Horizons Growth Fund to
the Nationwide Mid-Cap Growth Fund series of the New Trust in exchange
for Class D shares of the Mid-Cap Growth Fund, which will be
distributed to shareholders of the Growth Fund.
(b) The transfer of the net assets of the Financial Horizons Cash Reserve
Fund to the Nationwide Money Market Fund series of the New Trust in
exchange for shares of the Money Market Fund, which will be distributed
to shareholders of the Cash Reserve Fund.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(c) The transfer of the net assets of the Financial Horizons Government
Bond Fund to the Nationwide Long-Term U.S. Government Bond Fund series
of the New Trust in exchange for Class D shares of the Long-Term U.S.
Government Bond Fund, which will be distributed to shareholders of the
Government Bond Fund.
(d) The transfer of the net assets of the Financial Horizons Municipal Bond
Fund to the Nationwide Tax-Free Income Fund series of the New Trust in
exchange for Class D shares of the Tax-Free Income Fund, which will be
distributed to shareholders of the Municipal Bond Fund.
The Board of Trustees of the Trust have fixed the close of business on December
18, 1997, as the record date for the determination of shareholders of the Trust
entitled to receive notice of and to vote at the meeting. The Combined
Prospectus/Proxy Statement contains further information regarding the meeting
and the proposals to be considered, including the revised fee structure, and
will be mailed to shareholders in early January 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
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, 1997, 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 audits 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, 1997, 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, 1997, and 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 5, 1997
COLUMBUS, OHIO
<PAGE>
FINANCIAL HORIZONS INVESTMENT TRUST
P.O. BOX 1492
THREE NATIONWIDE PLAZA
COLUMBUS OH 43216-1492
October 31, 1997
Annual Report
FH-0012-N
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