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SEAFIRST RETIREMENT FUNDS
ASSET ALLOCATION FUND
BLUE CHIP FUND
BOND FUND
PACIFIC HORIZON FUNDS, INC.
PRIME FUND
Annual Report
February 29, 1996
------------------------------
NOT FDIC Insured
Concord Financial Group, Inc., Distributor
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SEAFIRST RETIREMENT FUNDS
PACIFIC HORIZON PRIME FUND
1-800-323-9919
Speech or hearing impaired TTY/TDD users may call 1-800-232-6299
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
DISTRIBUTOR
Concord Financial Group, Inc.
3435 Stelzer Road
Columbus, OH 43219
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
SEAFIRST RETIREMENT FUNDS ADMINISTRATOR
Seattle-First National Bank
701 Fifth Avenue
Seattle, WA 98104
PACIFIC HORIZON PRIME FUND ADMINISTRATOR
Concord Holding Corporation
3435 Stelzer Road
Columbus, OH 43219
For further information about retirement accounts, contact a Personal Banker
at any Seafirst branch or call Monday through Friday 8 a.m. to 6 p.m.
or Saturday 9 a.m. to 1 p.m. (Pacific time)
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Seafirst Retirement Funds and the Pacific Horizon Prime Fund are sponsored
and distributed by Concord Financial Group, Inc., which is unaffiliated with
Bank of America or Seafirst Bank. Bank of America serves as investment adviser
and receives fees for such services. From time to time, Bank of America may
provide other services to the Funds for additional fees, as disclosed in the
Funds' prospectuses.
There can be no assurance that the Pacific Horizon Prime Fund will be able to
maintain a net asset value of $1.00 per share and Fund shares are not insured or
guaranteed by the U.S. Government or its agencies.
This material must be preceded or accompanied by a current prospectus.
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INVESTMENTS IN SEAFIRST RETIREMENT FUNDS AND THE PACIFIC
HORIZON FUNDS, INC. ARE NOT BANK DEPOSITS AND ARE NOT
OBLIGATIONS OF OR GUARANTEED BY SEAFIRST BANK, BANK OF NOT
AMERICA OR ANY AFFILIATES OF EITHER. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
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Contents
<TABLE>
<S> <C>
ECONOMIC REVIEW 3
INTERVIEWS WITH YOUR
INVESTMENT MANAGERS 4-17
SEAFIRST RETIREMENT FUNDS
Statements of Assets
and Liabilities 18
Statements of Operations 19
Statements of Changes
in Net Assets 20-22
Notes to Financial
Statements 23-26
Financial Highlights 27-29
Report of Independent Accountants 30
MASTER INVESTMENT TRUST -- SERIES I
Portfolios of Investments 31-42
Statements of Assets
and Liabilities 43
Statements of Operations 44
Statements of Changes
in Net Assets 45-47
Notes to Financial
Statements 48-53
Supplementary Data 54-56
Report of Independent Accountants 57
PACIFIC HORIZON PRIME FUND
Portfolio of Investments 58-66
Statement of Assets
and Liabilities 67
Statement of Operations 68
Statements of Changes
in Net Assets 69
Notes to Financial
Statements 70-76
Financial Highlights 77-79
Report of Independent Accountants 80
</TABLE>
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[This page intentionally left blank.]
2
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ECONOMIC REVIEW
FROM THE INVESTMENT ADVISER
The 12 months ended February 29, 1996, witnessed a year of surprising strength
in the financial markets. Stock prices rose sharply, with the Dow Jones
Industrial Average surging 38% and other stock market indices posting very
strong gains. The bond market also turned in healthy results, particularly in
the long-term sector, with the bellwether 30-year Treasury bond registering an
18.45% total return.
The stock and bond markets were propelled largely by the Federal Reserve Board's
apparent success at slowing the economy to a sustainable annual growth rate of
around 2% and, at the same time, keeping inflation under control.
FUNDAMENTAL ECONOMIC
STRENGTHS
This favorable combination of modest economic growth and a low-inflation
environment allowed long-term interest rates to decline through most of the
period, spurring gains for both stocks and bonds. In fact, with mounting
evidence of slower economic growth, the Federal Reserve began lowering
short-term rates last summer to help prevent the economy from slowing down too
much.
Meanwhile, corporate profits continued to grow at a solid clip. The major
factors driving earnings included productivity gains and rising exports. In
addition, the U.S. dollar generally was weak, so the overseas profits that many
American companies earned in foreign currencies became more valuable in dollar
terms.
ASSET ALLOCATION KEY
TO PERFORMANCE
For investors, the key investment decision during the period was asset
allocation. The best-performing stock market sectors included financial services
and technology (despite a weak fourth quarter) -- but many other groups also
delivered strong gains.
LOOKING AHEAD
We expect the market environment in 1996 to favor our approach, as investors
look for companies that can produce consistent earnings gains in an economy
growing at a relatively modest 2%-to-3% annual rate. Corporate profits should
continue to grow as companies continue to reap the benefits of productivity
gains made during the past decade. However, earnings aren't likely to rise as
quickly as they did last year.
The economy's pace probably will be slow enough to prevent a sharp rebound in
interest rates, which is good news for both stock and bond investors. But it's
also unlikely that rates will decline sharply from their current levels, which
are high relative to inflation. Thus, stock and bond investors might expect more
modest returns during the coming year than they received in 1995. Still, that
leaves plenty of room for respectable performance.
3
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SEAFIRST
ASSET ALLOCATION FUND
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[PHOTO]
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ROBERT PYLES
Director of Equity
Bank of America NT&SA
Mr. Pyles manages the equity portion of the Asset Allocation Fund.
GOAL:
The Seafirst Asset Allocation Fund seeks long-term growth from capital
appreciation and dividend and interest income.
INVESTMENTS:
The Fund uses a balanced approach by investing in stocks, bonds and cash-
equivalent securities.
APPROPRIATE FOR:
Investors seeking growth and income through a diversified portfolio of stocks
and bonds.
INCEPTION:
March 9, 1988
SIZE OF FUND AS OF
FEBRUARY 29, 1996
Over $158 million
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[PHOTO]
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STEVEN L. VIELHABER
Director of Taxable Fixed Income
Bank of America NT&SA
Mr. Vielhaber is a leading member of the investment management team for the
fixed-income portion of the Asset Allocation Fund.
Q
HOW DID YOU ALLOCATE THE FUND'S ASSETS AMONG STOCKS, BONDS AND CASH DURING
THE RECENT 12 MONTHS?
A
We held about 56% of the Fund's investments in stocks, with 40% in bonds and
4% in cash. That was roughly a neutral position for us, reflecting our belief
that stocks and bonds were fairly valued on a relative basis. For the 12 months
ended February 29, 1996, the Fund had a total return of 22.44% compared to the
Fund's benchmarks, the Standard & Poor's 500 Stock Index and the Lehman Brothers
Aggregate Bond Index, which returned 34.60% and 12.24%, respectively.
Q
WHAT WAS THE BASIS FOR THAT DECISION?
A
Stock prices climbed sharply during the year, but that increase was
justified by strongly rising corporate earnings and lower bond yields. We also
felt that stocks were a better value than low-yield cash instruments.
4
<PAGE> 7
Q
WHAT KIND OF STOCKS DID YOU CHOOSE FOR THE PORTFOLIO?
A
We believe that earnings drive stock prices. We look for firms that we think
can deliver strong profit growth over time and try to buy those firms' shares at
reasonable prices. We also make moderate bets on specific sectors of the stock
market -- we emphasize individual stock selection within the sectors.
During the recent period we felt that the economy was going through a temporary
slowdown that would likely last six to nine months before giving way to faster
economic growth. Those views encouraged us to reduce, but not eliminate, our
moderate overweighting in economically sensitive sectors such as capital goods
and technology. Firms such as Alco Standard (1.39% of net assets as of February
29, 1996), General Electric (2.04%), Intel (1.17%) and Emerson Electric (0.76%)
performed well. We believe that they will continue to benefit from faster
economic growth. What's more, they offer significant productivity benefits to
their customers.
We also held shares of large growth companies such as Household International
(1.23%) and Pfizer (0.60%). They performed well as investors sought to buy
stocks of firms that can deliver solid earnings growth even in a slow economic
environment.+
Q
HOW DO YOU MANAGE THE BONDS IN THE PORTFOLIO?
A
The bond portion of the portfolio includes government, corporate and
mortgage securities. Its average duration generally stays close to the average
for the Lehman Brothers Aggregate Bond Index. For the past 12 months, that meant
an average duration of 4.5 to 5 years. Since a portfolio's average duration
determines its sensitivity to changes in interest rates, we kept the average
duration of the Fund's bonds pretty much in line with the market as a whole.
Q
LOOKING AHEAD, DO YOU EXPECT TO MAKE SIGNIFICANT CHANGES IN THE FUND'S
PORTFOLIO?
A
It seems likely that the pace of economic growth will increase during the
coming period, while inflation will likely remain low. In that environment,
we'll continue to look for companies that can deliver steady earnings growth in
a variety of conditions -- but also can benefit from an economic expansion. We
expect to continue to hold a relatively stable mix of stocks, bonds and cash in
the near term.
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+ The composition of the Fund's holdings is subject to change.
5
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SEAFIRST
ASSET ALLOCATION FUND
(AS OF FEBRUARY 29, 1996)
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
[GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MEASUREMENT PERIOD SEAFIRST ASSET AGGREGATE BOND LIPPER FLEXIBLE
(FISCAL YEAR COVERED) ALLOCATION FUND INDEX S&P 500 FUNDS AVERAGE
<S> <C> <C> <C> <C>
3/31/88 10000 10000 10000 10000
4/30/88 10136 9946 10125 9797
5/31/88 10158 9879 10190 9759
6/30/88 10478 10117 10661 10044
7/31/88 10453 10064 10635 9966
8/31/88 10332 10090 10259 9838
9/30/88 10592 10319 10698 10076
10/31/88 10748 10513 11007 10181
11/30/88 10683 10385 10833 10096
12/31/88 10829 10396 11026 10204
1/31/89 11230 10546 11843 10518
2/28/89 11120 10470 11536 10438
3/31/89 11215 10515 11812 10571
4/30/89 11518 10735 12438 10867
5/31/89 11767 11017 12910 11168
6/30/89 11870 11352 12844 11208
7/31/89 12353 11594 14015 11717
8/31/89 12482 11425 14270 11833
9/30/89 12491 11483 14215 11860
10/31/89 12497 11765 13898 11695
11/30/89 12726 11877 14168 11845
12/31/89 12882 11909 14511 11946
1/31/90 12498 11767 13556 11520
2/28/90 12654 11805 13713 11620
3/31/90 12881 11813 14086 11763
4/30/90 12740 11705 13750 11597
5/31/90 13429 12051 15053 12181
6/30/90 13495 12245 14963 12247
7/31/90 13633 12414 14927 12234
8/31/90 12924 12248 13567 11668
9/30/90 12580 12349 12917 11402
10/31/90 12623 12506 12873 11362
11/30/90 13128 12775 13687 11789
12/31/90 13412 12974 14069 12057
1/31/91 13711 13135 14681 12482
2/28/91 14116 13247 15730 13013
3/31/91 14226 13338 16111 13241
4/30/91 14240 13482 16150 13259
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
5/31/91 14590 13561 16846 13620
6/30/91 14299 13554 16074 13220
7/31/91 14660 13742 16823 13583
8/31/91 14894 14039 17222 13895
9/30/91 14977 14324 16934 13941
10/31/91 15181 14483 17161 14164
11/30/91 14857 14616 16470 13871
12/31/91 15845 15050 18354 14976
1/31/92 15840 14846 18013 14929
2/29/92 15986 14942 18247 15110
3/31/92 15843 14859 17891 14828
4/30/92 16207 14966 18417 14855
5/31/92 16391 15248 18507 15025
6/30/92 16298 15459 18231 14904
7/31/92 16676 15774 18977 15341
8/31/92 16400 15933 18588 15209
9/30/92 16544 16123 18807 15381
10/31/92 16351 15909 18871 15336
11/30/92 16637 15912 19515 15638
12/31/92 16734 16165 19755 15862
1/31/93 16895 16475 19921 16123
2/28/93 17211 16763 20192 16230
3/31/93 17409 16834 20618 16610
4/30/93 17444 16952 20119 16454
5/31/93 17749 16974 20656 16736
6/30/93 17795 17281 20716 16862
7/31/93 17884 17380 20633 16915
8/31/93 18322 17684 21415 17496
9/30/93 18076 17731 21250 17584
10/31/93 18392 17797 21690 17820
11/30/93 18371 17646 21484 17554
12/31/93 18584 17741 21744 17956
1/31/94 19057 17981 22483 18422
2/28/94 18651 17668 21872 18084
3/31/94 18012 17231 20918 17424
4/30/94 18044 17093 21189 17451
5/31/94 18151 17092 21537 17504
6/30/94 17888 17054 21004 17208
7/31/94 18390 17393 21699 17566
8/31/94 18887 17414 22582 18003
9/30/94 18464 17158 22037 17762
10/31/94 18703 17143 22541 17801
11/30/94 18280 17105 21714 17390
12/31/94 18458 17223 22031 17520
1/31/95 18817 17564 22603 17627
2/28/95 19452 17982 23480 18136
3/31/95 19810 18090 24175 18486
4/30/95 20199 18343 24879 18847
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
5/31/95 20965 19053 25861 19849
6/30/95 21360 19192 26469 20260
7/31/95 21684 19150 27350 20771
8/31/95 21858 19382 27424 20943
9/30/95 22342 19570 28573 21408
10/31/95 22361 19824 28473 21288
11/30/95 23037 20122 29726 21937
12/31/95 23306 20403 30276 22229
1/31/96 23764 20538 31318 22258
2/29/96 23817 20183 31604 22403
</TABLE>
HOW PERFORMANCE COMPARES
The chart compares the Seafirst Asset Allocation Fund to the S&P 500 Index,
which is an unmanaged index typically used as a performance benchmark for equity
investments and to the Lehman Brothers Aggregate Bond Index, an unmanaged index
with investment policies similar to the Fund. Hypothetical investments in the
S&P 500 Index and Lehman Brothers Aggregate Bond Index do not reflect any sales
or management fees that would be incurred if an investor were to actually
purchase individual securities or mutual funds, while the performance of
the Fund reflects all expenses and management fees.
The Fund fared well compared to other asset allocation funds. The average of
asset allocation funds as tracked by Lipper Analytical Services, Inc. measures
the performance of other funds with investment objectives and policies similar
to those of the Seafirst Asset Allocation Fund. An initial $10,000 investment in
the Fund made on March 31, 1988 would now be worth $23,817, while the same
investment made in the Lipper Flexible Funds Average would be worth $22,403.
SEE INVESTMENT MANAGER INTERVIEW FOR FACTORS AFFECTING FUND PERFORMANCE.
The adviser and administrator are voluntarily waiving advisory and
administrative fees for the Master Investment Trust, in which the Fund is wholly
invested. If the adviser and administrator had not waived fees, total return
would have been lower. This voluntary waiver of fees may be modified or
terminated at any time, which would reduce the Fund's performance.
Investment return and principal value are historical and will vary with market
conditions, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
Return figures for the Fund include change in share price, reinvestment of
dividends and capital gains distributions, if any.
S&P 500 is a registered trademark of Standard & Poor's Corporation. Lipper
Analytical Services, Inc. is an independent mutual fund-monitoring organization.
Neither the S&P 500 Index, the Lipper Flexible Funds Average, nor the Lehman
Brothers Aggregate Bond Index may be invested in directly.
<TABLE>
<CAPTION>
--------------------------
AVERAGE ANNUAL RETURN
---------------------------
<S> <C>
1 year: 22.44%
..............................
5 year: 11.06%
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Since inception
(3/9/88): 11.60%
</TABLE>
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6
<PAGE> 9
SEAFIRST
ASSET ALLOCATION FUND
(AS OF FEBRUARY 29, 1996)
PORTFOLIO COMPOSITION*
A Market-Driven Process
The Fund's adviser seeks to determine relative values among stocks, bonds and
cash equivalents and weights the portfolio accordingly. The Fund's adviser
looks for the following characteristics within each asset class: Stock holdings
that display above-average growth potential and reasonable valuation. The
diversified bond portfolio may contain mortgage-backed securities as well as
fixed-income obligations that are undervalued in the opinion of the Fund's
adviser. The Fund's cash holdings can be viewed as a defensive position in
changing markets.
[GRAPH]
ASSET ALLOCATION
<TABLE>
<S> <C>
COMMON STOCKS 55.80%
CASH & EQUIVALENTS 4.42%
BONDS 39.78%
</TABLE>
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* The composition of the Fund's
holdings is subject to change.
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A BALANCED INVESTMENT
APPROACH
Allocation Among Asset Classes
The Fund may be appropriate for investors seeking long-term growth from capital
appreciation as well as dividend and interest income through a balanced
approach to investing using bonds, stocks and cash equivalents. Investors can
make one simple investment and their money will be spread over a variety of
asset classes. The Fund's adviser seeks a total return greater than bonds or
cash with less volatility than an investment in stocks. Through strategically
allocating assets among various investments, the Fund's adviser will shift the
asset mix as market conditions change, thereby seeking to profit from market
opportunities in any economic environment.
SHIFTING THE ASSET MIX
[GRAPHICS]
7
<PAGE> 10
SEAFIRST
BLUE CHIP FUND
- ----------------------
[PHOTO]
- ----------------------
JAMES D. MILLER, CFA
Chief Investment Officer
Bank of America Illinois
Investment Advisors Division
Mr. Miller is a leading member of the investment management team for the Blue
Chip Fund.
GOAL:
The Seafirst Blue Chip Fund seeks long-term capital appreciation.
INVESTMENTS:
The Fund invests primarily in a diversified group of "blue chip" common stocks,
which are included in either the Dow Jones Industrial Average or the Standard &
Poor's 500 Index.
APPROPRIATE FOR:
Investors who want to participate in the growth potential of some of America's
major companies. The Fund is a diversified equity product that can be used as
part of many investment strategies.
INCEPTION:
March 9, 1988
SIZE OF FUND AS OF
FEBRUARY 29, 1996:
Over $206 million
Q
HOW DID YOU MANAGE THE FUND DURING THE RECENT PERIOD?
A
We continued to manage the Fund in our very disciplined quantitative style
and concentrated heavily on risk management. We start by neutralizing most of
the divergent risk factors to the benchmark S&P 500. This includes sector and
size risk, among others. By this, we mean that the portfolio's holdings are
designed to mirror the sector allocations of the Standard & Poor's 500 Stock
Index. Likewise, the portfolio's average weighted size should approximate that
of the index.
The result is that our Fund is designed not to suffer or benefit any more than
the index when a particular sector performs well or badly. Likewise, the Fund is
designed not to decline more or less than the index when small- or
large-capitalization stocks have an especially good or bad year. Since we keep
risks in line with those in the benchmark, we attempt to add value through stock
selection.
For the 12 months ended February 29, 1996, the Fund performed more or less in
line with the index with a total return of 33.37%, compared to 34.60% for the
S&P 500.
Q
HOW IS THE FUND DIFFERENT FROM AN INDEX FUND?
A
As I said before, unlike an index fund, we attempt to add value through
individual security selection. Our goal is to buy the best stocks in each
sector -- by which we mean the stocks that add the most potential reward to our
portfolio for the least risk.
Q
HOW DID YOU CHOOSE STOCKS DURING THE RECENT PERIOD?
A
We looked at a number of different factors that can affect a stock's per-
8
<PAGE> 11
formance and weighted most heavily those having the most impact during the
period. Then we used that information to select stocks that we believed would do
well.
For example, during the past year one of the most important factors determining
stock prices included something we call "earnings certainty." We found that
people were buying shares of companies that had similar earnings estimates from
different analysts.
Likewise, investors liked stocks of companies that had experienced the biggest
increases in analysts' earnings estimates -- our "rising earnings expectations"
model. And we discovered that investors were looking for companies whose shares
were selling at a low multiple of earnings. Consequently, we purchased lower P/E
stocks that demonstrated a clearer, brighter future earnings potential.
Q
WHAT ARE SOME STOCKS YOU BOUGHT BASED ON THOSE THREE FACTORS?
A
A number of our picks were large, well-known companies such as Chrysler
(1.14% of net assets as of February 29, 1996) and Merck (1.56%), both of which
scored well based on all three factors. Pepsico (2.43%) was particularly
attractive as well, largely on the basis of rising earnings expectations and
earnings certainty.+
Q
ARE YOU PLANNING ANY IMPORTANT STRATEGIC CHANGES FOR THE COMING PERIOD?
A
No. As always, we will make no attempt to forecast the direction of stock
prices in general or specific market sectors. Instead, we will continue to keep
track of the factors that are most likely to affect the returns of specific
stocks. Then we will invest in stocks with the appropriate characteristics.
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+ The composition of the Fund's holdings is subject to change.
9
<PAGE> 12
SEAFIRST
BLUE CHIP FUND
(AS OF FEBRUARY 29, 1996)
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD LIPPER GROWTH
(FISCAL YEAR COVERED) FUND FUNDS AVERAGE S&P 500
<S> <C> <C> <C>
03/31/88 10000.00 10000 10000.00
04/30/88 10178.67 9858 10125.00
05/31/88 10221.81 9790 10189.80
06/30/88 10699.34 10326 10660.57
07/31/88 10644.69 10185 10634.98
08/31/88 10280.06 9885 10258.80
09/30/88 10639.84 10260 10697.57
10/31/88 10857.56 10358 11006.73
11/30/88 10756.62 10147 10832.82
12/31/88 11039.32 10412 11025.65
01/31/89 11904.53 11059 11842.65
02/28/89 11573.03 10916 11535.92
03/31/89 11798.97 11165 11811.63
04/30/89 12437.42 11733 12437.65
05/31/89 12775.26 12241 12910.28
06/30/89 12620.41 12090 12844.44
07/31/89 13714.03 12965 14014.56
08/31/89 14111.78 13309 14269.63
09/30/89 13993.44 13348 14215.40
10/31/89 13704.17 12917 13898.40
11/30/89 14109.27 13110 14168.03
12/31/89 14380.07 13242 14510.90
01/31/90 13536.50 12366 13556.08
02/28/90 13802.89 12572 13713.33
03/31/90 14225.57 12950 14086.33
04/30/90 13964.35 12671 13749.67
05/31/90 15193.81 13877 15053.14
06/30/90 15169.73 13929 14962.82
07/31/90 15282.77 13680 14926.91
08/31/90 13828.93 12396 13567.07
09/30/90 13033.30 11666 12917.20
10/31/90 12975.58 11436 12873.29
11/30/90 13723.90 12203 13686.88
12/31/90 14130.52 12620 14068.74
01/31/91 14658.83 13449 14680.73
02/28/91 15521.05 14427 15730.40
03/31/91 15708.72 14895 16111.08
04/30/91 15539.72 14873 16149.75
05/31/91 16308.03 15507 16845.80
</TABLE>
<TABLE>
<S> <C> <C> <C>
06/30/91 15682.54 14722 16074.26
07/31/91 16319.76 15497 16823.32
08/31/91 16477.25 15989 17222.04
09/30/91 16335.94 15838 16934.43
10/31/91 16647.59 16162 17161.35
11/30/91 15767.95 15532 16469.75
12/31/91 17304.01 17336 18353.89
01/31/92 17497.93 17379 18012.50
02/29/92 17760.28 17637 18246.67
03/31/92 17564.51 17082 17890.86
04/30/92 18171.76 16981 18416.85
05/31/92 18309.25 17105 18507.09
06/30/92 17926.78 16586 18231.33
07/31/92 18364.30 17180 18977.00
08/31/92 17708.02 16804 18587.97
09/30/92 17834.47 17082 18807.31
10/31/92 17660.87 17432 18871.25
11/30/92 18227.96 18327 19514.76
12/31/92 18203.22 18660 19754.79
01/31/93 18261.38 18913 19920.73
02/28/93 18645.22 18632 20191.65
03/31/93 18981.15 19160 20617.70
04/30/93 18934.40 18608 20118.75
05/31/93 19542.17 19300 20655.92
06/30/93 19407.23 19351 20715.82
07/31/93 19501.15 19293 20632.96
08/31/93 20182.11 20125 21414.95
09/30/93 19645.96 20314 21250.05
10/31/93 20270.95 20622 21689.93
11/30/93 20436.04 20206 21483.87
12/31/93 20522.67 20798 21743.83
01/31/94 20759.67 21459 22483.12
02/28/94 21434.69 21104 21871.58
03/31/94 21020.20 20089 20918.20
04/30/94 20130.92 20175 21188.67
05/31/94 20321.06 20284 21537.22
06/30/94 20570.62 19588 21004.39
07/31/94 20064.59 20118 21699.01
08/31/94 20814.34 21035 22581.94
09/30/94 21730.69 20610 22037.49
10/31/94 21104.32 20927 22541.49
11/30/94 20854.23 20131 21713.99
12/31/94 21081.30 20317 22030.80
01/31/95 21508.88 20458 22603.38
02/28/95 22481 21260 23480
03/31/95 23100 21855 24175
04/30/95 23659 22319 24879
05/31/95 24570 22984 25861
06/30/95 25194 23965 26469
</TABLE>
<TABLE>
<S> <C> <C> <C>
07/31/95 26150 25120 27350
08/31/95 26124 25306 27424
09/30/95 27201 26060 28513
10/31/95 27109 25690 28473
11/30/95 28214 26597 29726
12/31/95 28605 26703 30276
01/31/96 29642 27293 31318
02/29/96 29984 27893 31604
</TABLE>
HOW PERFORMANCE COMPARES
The chart compares the Seafirst Blue Chip Fund to the S&P 500 Index, which is
an un-managed index often used as a performance benchmark for equity
investments. The hypothetical investment in the S&P 500 Index does not reflect
any sales or management fees that would be incurred if an investor were to
actually purchase individual securities or mutual funds, while the
performance of the Fund reflects all expenses and management fees.
The Fund fared well compared to other growth funds. The average of growth funds
as tracked by Lipper Analytical Services, Inc. measures the performance of other
funds with investment objectives and policies similar to those of the Seafirst
Blue Chip Fund. An initial $10,000 investment in the Fund made on March 31, 1988
would now be worth $29,984, while the same investment made in the Lipper Growth
Funds Average would be worth only $27,893.
SEE INVESTMENT MANAGER INTERVIEW FOR FACTORS AFFECTING FUND PERFORMANCE.
The adviser and administrator are voluntarily waiving advisory and
administrative fees for the Master Investment Trust, in which the Fund is wholly
invested. If the adviser and administrator had not waived fees, total return
would have been lower. This voluntary waiver of fees may be modified or
terminated at any time, which would reduce the Fund's performance.
Investment return and principal value are historical and will vary with market
conditions, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
Return figures for the Fund include change in share price, reinvestment of
dividends and capital gains distributions, if any.
S&P 500 is a registered trademark of Standard & Poor's Corporation. Lipper
Analytical Services, Inc. is an independent mutual fund-monitoring organization.
Neither the S&P 500 nor the Lipper Growth Funds Average may be invested in
directly.
<TABLE>
<CAPTION>
----------------------------
AVERAGE ANNUAL RETURN
----------------------------
<S> <C>
1 year: 33.37%
.............................
5 year: 14.06%
.............................
Since inception
(3/9/88): 14.78%
----------------------------
</TABLE>
10
<PAGE> 13
SEAFIRST
BLUE CHIP FUND
(AS OF FEBRUARY 29, 1996)
PORTFOLIO COMPOSITION
FUND QUALITY
A Strategy for Long-Term Capital
Appreciation
The Fund maintains a "quality" investment orientation by placing an emphasis on
the securities of well-known established companies. This "blue chip" approach
may be appropriate for investors seeking long-term growth of capital. At least
80% of the Fund's assets are normally invested in blue chip stocks. To meet the
criteria set by the Fund's investment objectives, these stocks must be
components of the Dow Jones Industrial Average or the Standard & Poor's
500 Index.
<TABLE>
<CAPTION>
TOP TEN HOLDINGS*
PERCENT OF
COMPANY NET ASSETS
<S> <C>
------------------------------------------------------
Mobil Corp. 2.5%
......................................................
PepsiCo. 2.4%
......................................................
Citicorp 2.2%
......................................................
Philip Morris Cos. 2.1%
......................................................
General Electric 2.0%
......................................................
International Business Machines 1.8%
......................................................
Bell South 1.7%
......................................................
United Technologies Corp. 1.7%
......................................................
Sears Roebuck & Co. 1.7%
......................................................
Exxon Corp. 1.7%
------------------------------------------------------
TOTAL 19.8%
------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
A RESEARCH-DRIVEN APPROACH*
[GRAPH]
<TABLE>
<S> <C>
Utilities 12.8
Finance 13.1
Consumer Staples 11.9
Health Care 10.7
Technology 11.3
Capital Goods 9.7
Energy 8.6
Basics 6.2
Transportation 1.7
Consumer Cyclical 14.0
<FN>
* The composition of the Fund's holdings is subject to change.
</TABLE>
The Fund adviser's research orientation seeks to identify individual stocks,
within the sector allocations mirroring those of the S&P 500, with the greatest
potential for long-term growth. The Fund's primary emphasis is on stocks that,
in the opinion of the Fund's adviser, have the greatest potential of superior
performance with the least amount of risk.
11
<PAGE> 14
SEAFIRST
BOND FUND
- ----------------------
[PHOTO]
- ----------------------
STEVEN L. VIELHABER
Director of Taxable Fixed Income
Bank of America NT&SA
Mr. Vielhaber is a leading member of the investment management team for the Bond
Fund.
GOAL:
The Seafirst Bond Fund seeks interest income and capital appreciation.
INVESTMENTS:
The Fund invests in a diversified portfolio of investment-grade, intermediate-
and longer-term bonds, including corporate and government fixed-income
obligations, mortgage-backed securities, municipal securities and cash
equivalents.
APPROPRIATE FOR:
Investors who want interest income and capital appreciation from a diversified
portfolio of fixed-income securities.
INCEPTION:
March 9, 1988
SIZE OF FUND AS OF
FEBRUARY 29, 1996:
Over $47 million
Q
HOW DID YOU MANAGE THE FUND DURING THE RECENT PERIOD?
A
The Fund maintained a relatively stable average duration of about 3.25
years during the 12 months ended February 29, 1996. That was relatively close
to the average duration of the Fund's benchmark, the Lehman Brothers
Government/Corporate Intermediate Bond Index. Duration is a measure of a fund's
price sensitivity to changes in interest rates; thus, our Fund's share price
was about as sensitive as the index to interest-rate changes. A duration of
about three years is fairly short and means that the Fund's net asset value
(NAV) is likely to be more stable than the NAVs of longer-duration portfolios.
(The trade-off for enhanced stability: potentially lower returns if interest
rates fall.)
There are different ways to meet a specific duration target. For example, one
way is to create an average duration of three years by combining very short-term
issues with longer term issues. Instead of this strategy, we chose a "bulleted"
approach, with a concentration in intermediate-term issues. We feel that our
approach tends to provide better returns when the Federal Reserve reduces
short-term interest rates, as it did during the recent period.
Our strategy resulted in a total return of 9.90% for the Fund for the 12 months
ended February 29, 1996, compared to 10.76% for the Lehman Brothers
Government/Corporate Intermediate Bond Index, for the same period.
Q
HOW DID YOU CHANGE THE FUND'S EXPOSURE TO DIFFERENT SECTORS OF THE BOND
MARKET?
A
We upgraded the credit quality of the Fund as the economy continued to slow.
When the economy slows, investors tend to prefer bonds whose issuers are in a
12
<PAGE> 15
strong position to weather a sluggish environment. We sold our 5% stake in bonds
rated BBB, which are at the low end of the investment-grade spectrum. We also
reduced the maturity of our corporate holdings. That trimmed our risk in the
corporate sector while allowing us to pick up some extra yield over Treasury
bonds. Because of their high credit quality, the Fund's longer-maturity holdings
were concentrated in Treasury securities.
Q
WHAT DO YOU SEE AHEAD FOR THE BOND MARKET AND THE FUND?
A
It seems likely that the economy will continue to grow at a relatively slow
rate during the coming period. In this environment, the Fund will continue to
emphasize higher-quality issues. We'll also concentrate on intermediate-term
securities and maintain a relatively neutral average duration -- that is, one
that is close to that of the Lehman Brothers index. And we'll continue to look
for opportunities to add value by purchasing undervalued securities.
13
<PAGE> 16
SEAFIRST
BOND FUND
(AS OF FEBRUARY 29, 1996)
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOVERN-
MENT/CORPORATE LIPPER INTERMED
MEASUREMENT PERIOD INTERMEDIATE IATE INVESTMENT
(FISCAL YEAR COVERED) FUND INDEX GRADE AVERAGE
<S> <C> <C> <C>
3/31/88 10000.00 10000.00 10000
4/30/88 10065.49 9983.00 9846
5/31/88 10123.87 9939.07 9793
6/30/88 10211.06 10097.11 9979
7/31/88 10230.43 10075.90 9956
8/31/88 10262.40 10091.02 9977
9/30/88 10412.00 10266.60 10155
10/31/88 10539.52 10406.23 10301
11/30/88 10473.95 10317.77 10208
12/31/88 10512.11 10327.06 10217
1/31/89 10635.20 10435.49 10339
2/28/89 10599.90 10391.66 10297
3/31/89 10672.93 10437.39 10327
4/30/89 10860.85 10647.18 10503
5/31/89 11073.69 10859.06 10716
6/30/89 11322.64 11132.71 10984
7/31/89 11507.96 11360.93 11195
8/31/89 11379.31 11214.37 11046
9/30/89 11449.77 11267.08 11101
10/31/89 11659.07 11504.81 11321
11/30/89 11760.60 11615.26 11404
12/31/89 11800.10 11646.62 11426
1/31/90 11737.14 11572.08 11301
2/28/90 11798.09 11613.74 11332
3/31/90 11834.71 11628.84 11341
4/30/90 11791.10 11588.14 11255
5/31/90 12038.06 11843.08 11523
6/30/90 12193.25 12001.77 11687
7/31/90 12360.60 12168.60 11842
8/31/90 12324.11 12118.71 11720
9/30/90 12397.09 12212.02 11781
10/31/90 12548.98 12353.68 11886
11/30/90 12735.16 12541.46 12107
12/31/90 12902.68 12713.28 12271
1/31/91 13017.85 12841.68 12397
</TABLE>
<TABLE>
<S> <C> <C> <C>
2/28/91 13091.29 12944.41 12504
3/31/91 13168.91 13032.43 12597
4/30/91 13300.72 13174.49 12735
5/31/91 13390.36 13254.85 12813
6/30/91 13378.88 13264.13 12815
7/31/91 13521.45 13411.36 12957
8/31/91 13769.69 13667.52 13243
9/30/91 13981.84 13902.60 13498
10/31/91 14137.88 14061.09 13643
11/30/91 14293.35 14222.79 13777
12/31/91 14621.60 14569.83 14203
1/31/92 14461.80 14437.24 14021
2/29/92 14504.66 14493.55 14086
3/31/92 14442.50 14437.02 14022
4/30/92 14553.87 14564.07 14116
5/31/92 14763.85 14789.81 14373
6/30/92 14974.45 15008.70 14580
7/31/92 15246.21 15307.38 14926
8/31/92 15399.56 15460.45 15063
9/30/92 15599.31 15670.71 15268
10/31/92 15374.26 15466.99 15040
11/3/92 15296.69 15408.22 15001
12/31/92 15511.72 15614.69 15217
1/31/93 15795.64 15919.17 15525
2/28/93 16025.25 16170.70 15817
3/31/93 16074.70 16235.38 15890
4/30/93 16198.27 16365.26 16005
5/31/93 16170.61 16329.26 15999
6/30/93 16362.58 16585.63 16294
7/31/93 16398.77 16625.43 16377
8/31/93 16589.58 16889.78 16688
9/30/93 16635.29 16960.72 16748
10/31/93 16652.56 17006.51 16817
11/30/93 16560.74 16911.27 16677
12/31/93 16615.36 16989.07 16775
1/31/93 16793.09 17177.64 16994
2/28/94 16521.14 16803.17 16690
3/31/94 16273.48 16391.49 16322
4/30/94 16135.73 16255.44 16171
5/31/94 16112.77 16226.18 16139
6/30/94 16111.06 16188.86 16111
7/31/94 16328.64 16512.64 16355
8/31/94 16361.34 16519.25 16398
9/30/94 16239.47 16269.81 16226
10/31/94 16234.58 16251.91 16209
11/30/94 16159.78 16222.66 16163
12/31/94 16219.61 16329.73 16232
1/31/95 16470.35 16643.26 16482
</TABLE>
<TABLE>
<S> <C> <C> <C>
2/28/95 16722 17029 16821
3/31/95 16834 17126 16927
4/30/95 17011 17338 17150
5/31/95 17505 17862 17763
6/30/95 17615 17982 17875
7/31/95 17600 17984 17832
8/31/95 17751 18147 18030
9/30/95 17870 18278 18190
10/31/95 18068 18481 18414
11/30/95 18266 18723 18676
12/31/95 18461 18920 18909
1/31/96 18602 19030 19038
2/29/96 18377 18861 18715
</TABLE>
HOW PERFORMANCE COMPARES
The chart compares the Seafirst Bond Fund to the Lehman Brothers
Government/Corporate Intermediate Bond Index, which is an unmanaged index used
as a performance benchmark for intermediate term investments. The hypothetical
investment in the index does not reflect any sales or management fees that
would be incurred if an investor were to actually purchase individual bonds,
securities or mutual funds, while the performance of the Fund reflects all
expenses and management fees.
The Fund tracked other bond funds. The average of intermediate investment funds
reported by Lipper Analytical Services, Inc. measures the performance of other
funds with investment objectives and policies similar to those of the Seafirst
Bond Fund. An initial $10,000 investment in the Fund made on March 31, 1988
would be worth $18,377 on February 29, 1996, while the same investment made in
the Lipper Intermediate Investment Funds Average would be worth $18,715.
SEE INVESTMENT MANAGER INTERVIEW FOR FACTORS AFFECTING FUND PERFORMANCE.
The adviser and administrator are voluntarily waiving advisory and
administrative fees for the Master Investment Trust, in which the Fund is wholly
invested. The administrator is also reimbursing expenses for the Fund. If the
adviser and administrator had not waived fees and reimbursed expenses, total
return would have been lower. This voluntary waiver of fees and reimbursement of
expenses may be modified or terminated at any time, which would reduce the
Fund's performance.
Investment return and principal value are historical and will vary with market
conditions, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
Return figures for the Fund include change in share price, reinvestment of
dividends and capital gains distributions, if any.
Lipper Analytical Services, Inc. is an independent mutual fund-monitoring
organization.
Neither the Lipper Intermediate Investment Grade Average nor the Lehman Brothers
Government/Corporate Intermediate Bond Index may be invested in directly.
<TABLE>
<CAPTION>
------------------------------
AVERAGE ANNUAL RETURN
------------------------------
<S> <C>
1 year: 9.90%
..............................
5 year: 7.08%
..............................
Since inception
(3/9/88): 8.01%
------------------------------
</TABLE>
14
<PAGE> 17
SEAFIRST
BOND FUND
(AS OF FEBRUARY 29, 1996)
PORTFOLIO COMPOSITION
[GRAPH]
MOODY'S RATING OF PORTFOLIO
COMPOSITION QUALITY*
<TABLE>
<S> <C>
Aaa 66.4
Aa 4.6
A 29.0
<FN>
- -----------------------------------------------------------
* The composition of the Fund's
holdings is subject to change.
</TABLE>
QUALITY
The credit research team at Bank of America, the Fund's adviser, monitors debt
instruments and issuer quality to identify fixed-income securities for the
Fund. With its emphasis on quality, the Fund invests primarily in securities
that are rated investment grade by an independent rating service or that are
issued by the U.S. Government. The security selection process also depends on
information about broad economic factors that can affect the bond markets.
- --------------------------------------------------------------------------------
FLEXIBILITY
Capitalizing on Changing Markets
The Fund invests in a varied portfolio of quality bonds in an effort to protect
principal against sharp price fluctuations and stabilize net asset value. The
Fund's adviser has great latitude in deciding how assets are invested among
corporate, government and mortgage-backed obligations. That means the Fund
enjoys total flexibility to make the most of changing market conditions.
[GRAPHICS]
15
<PAGE> 18
PACIFIC HORIZON
PRIME FUND
- ---------------
[PHOTO]
- ---------------
MARIKA ECONOMOS
Investment Manager
Bank of America NT&SA
Taxable Money Market Funds
GOAL:
The Pacific Horizon Prime Fund seeks to provide a high level of current income,
daily liquidity and stability of principal by investing in U.S.
dollar-denominated short-term money-market instruments.
INVESTMENTS:
The Prime Fund seeks its objectives through a broad range of U.S. Government,
bank and corporate short-term money market instruments.
APPROPRIATE FOR:
Investors or institutions that want daily liquidity.
SIZE OF FUND AS OF
FEBRUARY 29, 1996:
Over $5.4 billion
Q
WHAT FACTORS AFFECTED THE MONEY FUNDS' PERFORMANCE DURING THE RECENT 12
MONTHS?
A
A year ago, there was considerable uncertainty about the direction of
interest rates. The Federal Reserve had implemented a series of increases in
short-term rates, and many investors expected it to raise rates yet again. But
by last spring it was clear that the economy was growing at a slower pace, and
the risk of more rate hikes faded. In fact, prices of short-term securities rose
to reflect investors' belief that the Federal Reserve would soon reduce
short-term rates -- which it did in July and again in December and January.
Q
HOW DID YOU MANAGE THE FUND IN THAT ENVIRONMENT?
A
The Fund began the period with a relatively short average maturity of
approximately 30 days so that we could quickly adapt to any rate increase. By
mid-summer, however, we believed the Federal Reserve would ease rates to keep
the economy from falling into a recession.
Our response was to implement a "barbell strategy," which combined investments
in overnight securities and longer-term issues. The short-term securities paid
attractive yields. The longer-term issues allowed us to lock in current interest
rates -- offering protection against reinvestment risk in a declining rate
environment. This strategy lengthened the Fund's average maturity from about 30
days last summer to 53 days by the end of the period.
Q
WHAT IS THE OUTLOOK FOR THE TAXABLE MONEY MARKETS?
A
The economy doesn't appear as weak as many investors believed in late 1995.
It also has become clear that balanc-
16
<PAGE> 19
ing the budget could be more difficult than first thought. And without a budget
deal, we can expect to see higher rates. One result is that prices of short-term
securities no longer reflect expectations for immediate rate cuts.
We expect to maintain our average maturities in the 45- to 50-day range for the
Fund as we still anticipate the Federal Reserve to lower short-term rates.
However, such a reduction probably will not come until later in the year. We
have shifted to a "laddered" approach, which includes investments in three-,
six- and nine-month maturities. Such a strategy reduces the risk of suffering
losses in longer-term securities if interest rates move higher. It also should
outperform a barbell approach in an environment of steady rates.
CURRENT SEVEN-DAY YIELD
AS OF FEBRUARY 29, 1996*
- ---------------------------------------
<TABLE>
<S> <C>
Prime Fund 4.91%
<FN>
- ---------------------------------------
- ------------
* Past performance is no guarantee of future results. Yields will fluctuate with
the market. Investments in money market funds are neither insured nor
guaranteed by the U.S. Government, and there can be no assurance that the
Funds will be able to maintain a stable net asset value of $1.00 per share.
</TABLE>
17
<PAGE> 20
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (in thousands)
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET
ALLOCATION BLUE CHIP
FUND FUND BOND FUND
---------- --------- ---------
<S> <C> <C> <C>
ASSETS:
Investment in Master Investment Trust,
Series I -- Asset Allocation Portfolio,
Blue Chip Portfolio and Investment Grade
Bond Portfolio, at value................ $ 158,592 $206,344 $ 47,100
Receivable from Administrator............. -- -- 5
Deferred organization costs, prepaid
expenses and other receivables.......... 32 36 32
---------- --------- ---------
Total assets................................ 158,624 206,380 47,137
---------- --------- ---------
LIABILITIES:
Administration fees payable............... 36 48 11
Accrued shareholder service fees.......... 32 41 10
Accrued reports to shareholders expense... 24 21 23
Accrued legal fees........................ 15 14 14
Accrued audit fees........................ 12 11 12
Other accrued expenses.................... 20 25 5
---------- --------- ---------
Total liabilities........................... 139 160 75
---------- --------- ---------
NET ASSETS.................................. $ 158,485 $206,220 $ 47,062
=========== ========== ===========
Shares Outstanding (no par value, unlimited
number of shares authorized).............. 10,592,206 9,778,995 4,330,357
=========== ========== ===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE................ $14.96 $21.09 $10.87
====== ====== ======
COMPOSITION OF NET ASSETS:
Paid-in capital........................... $ 140,369 $159,992 $ 48,907
Accumulated net realized gains (losses)... 3,491 5,844 (1,988 )
Undistributed net investment income....... -- 479 --
Net unrealized appreciation on
investments............................. 14,625 39,905 143
---------- --------- ---------
NET ASSETS, FEBRUARY 29, 1996............... $ 158,485 $206,220 $ 47,062
=========== ========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
18
<PAGE> 21
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Operations (in thousands)
For the year ended February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET
ALLOCATION BLUE CHIP
FUND FUND BOND FUND
---------- --------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series
I -- Asset Allocation Portfolio, Blue Chip Portfolio and
Investment Grade Bond Portfolio, respectively:
Interest...................................................... $ 4,524 $ 363 $ 3,460
Dividends..................................................... 1,781 4,084 --
---------- --------- ---------
6,305 4,447 3,460
---------- --------- ---------
EXPENSES......................................................... 1,123 1,603 360
Less: Fee waivers and expense reimbursements.................... (726) (1,077) (259)
---------- --------- ---------
397 526 101
---------- --------- ---------
Net Investment Income from Master Investment Trust, Series I --
Asset Allocation Portfolio, Blue Chip Portfolio and Investment
Grade Bond Portfolio, respectively.............................. 5,908 3,921 3,359
---------- --------- ---------
EXPENSES:
Administration fees............................................. 443 521 150
Shareholder service fees........................................ 382 449 129
Custodian fees and expenses..................................... 46 54 16
Reports to shareholders expense................................. 37 37 37
Legal fees...................................................... 33 36 36
Audit fees...................................................... 18 24 19
Registration fees and expenses.................................. 19 22 14
Insurance expense............................................... 12 13 5
Trustees fees................................................... 10 10 6
Amortization of organization costs.............................. 8 8 6
Other operating expenses........................................ 31 5 33
---------- --------- ---------
1,039 1,179 451
Less: Fee waivers and expense reimbursements.................... -- -- (62)
---------- --------- ---------
1,039 1,179 389
---------- --------- ---------
Net Investment Income............................................ 4,869 2,742 2,970
---------- --------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM
MASTER INVESTMENT TRUST, SERIES I -- ASSET ALLOCATION PORTFOLIO,
BLUE CHIP PORTFOLIO AND INVESTMENT GRADE BOND PORTFOLIO,
RESPECTIVELY
Net realized gain on securities transactions.................... 18,289 19,935 2,153
Net change in unrealized appreciation (depreciation) on
investments................................................... 7,580 28,575 (139)
---------- --------- ---------
Net Gain on Investments from Master Investment Trust, Series I --
Asset Allocation Portfolio, Blue Chip Portfolio and Investment
Grade Bond Portfolio, respectively.............................. 25,869 48,510 2,014
---------- --------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 30,738 $51,252 $ 4,984
=========== ========== =======
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 22
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
----------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 4,869 $ 5,133
Net realized gain (loss) on securities transactions.... 18,289 (4,691)
Net change in unrealized appreciation of investments... 7,580 5,672
------------ ------------
Net increase in net assets resulting from operations... 30,738 6,114
------------ ------------
Dividends and Distributions to Shareholders:
Dividends to shareholders from net investment
income............................................... (4,869) (5,133)
Distributions to shareholders from net realized
gains................................................ (10,103) (6,328)
------------ ------------
Total Dividends and Distributions to Shareholders........ (14,972) (11,461)
------------ ------------
Fund Share Transactions:
Net proceeds from shares subscribed.................... 14,252 21,409
Net asset value of shares issued to shareholders in
reinvestment of dividends............................ 14,972 11,461
Shares redeemed........................................ (31,637) (39,346)
------------ ------------
Net decrease in net assets resulting from Fund share
transactions......................................... (2,413) (6,476)
------------ ------------
Total Increase (Decrease)................................ 13,353 (11,823)
NET ASSETS:
Beginning of year...................................... 145,132 156,955
------------ ------------
End of year............................................ $158,485 $145,132
========== ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
20
<PAGE> 23
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (in thousands) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BLUE CHIP FUND
----------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 2,742 $ 2,319
Net realized gain on securities transactions........... 19,935 421
Net change in unrealized appreciation of investments... 28,575 7,514
------------ ------------
Net increase in net assets resulting from operations... 51,252 10,254
------------ ------------
Dividends and Distributions to Shareholders:
Dividends to shareholders from net investment income... (2,736) (2,156)
Distributions to shareholders from net realized
gains................................................ (14,510) (10,537)
------------ ------------
Total Dividends and Distributions to Shareholders........ (17,246) (12,693)
------------ ------------
Fund Share Transactions:
Net proceeds from shares subscribed.................... 34,754 35,008
Net asset value of shares issued to shareholders in
reinvestment of dividends............................ 17,246 12,693
Shares redeemed........................................ (31,053) (26,911)
------------ ------------
Net increase in net assets resulting from Fund share
transactions......................................... 20,947 20,790
------------ ------------
Total Increase........................................... 54,953 18,351
NET ASSETS:
Beginning of year...................................... 151,267 132,916
------------ ------------
End of year (including undistributed net investment
income of $479,371 and $473,208, respectively)....... $206,220 $151,267
========== ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
21
<PAGE> 24
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (in thousands) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND
----------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 2,970 $ 3,613
Net realized gain (loss) on securities transactions.... 2,153 (4,130)
Net change in unrealized appreciation (depreciation) of
investments.......................................... (139) 991
------------ ------------
Net increase in net assets resulting from operations... 4,984 474
------------ ------------
Dividends and Distributions to Shareholders:
Dividends to shareholders from net investment
income............................................... (2,970) (3,613)
Distributions to shareholders from net realized
gains................................................ -- (369)
------------ ------------
Total Dividends and Distributions to Shareholders........ (2,970) (3,982)
------------ ------------
Fund Share Transactions:
Net proceeds from shares subscribed.................... 3,242 5,341
Net asset value of shares issued to shareholders in
reinvestment of dividends............................ 2,970 3,982
Shares redeemed........................................ (16,954) (26,798)
------------ ------------
Net decrease in net assets resulting from Fund share
transactions......................................... (10,742) (17,475)
------------ ------------
Total Decrease........................................... (8,728) (20,983)
NET ASSETS:
Beginning of year...................................... 55,790 76,773
------------ ------------
End of year............................................ $ 47,062 $ 55,790
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 25
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Seafirst Retirement Funds (the "Company"), a Delaware business trust, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At February 29, 1996, the Company
consisted of three funds -- the Asset Allocation Fund, the Blue Chip Fund and
the Bond Fund (collectively, the "SRF Funds").
The SRF Funds seek to achieve their investment objective by investing
substantially all of their assets in the corresponding Portfolios that have the
same investment objectives as those of the Funds. The value of each SRF Fund's
investment in each Portfolio included in the accompanying statements of assets
and liabilities reflects each SRF Fund's proportionate beneficial interest in
the net assets of that Portfolio. At February 29, 1996, the SRF Funds held
proportionate interests in the corresponding Portfolios in the following
amounts:
<TABLE>
<S> <C>
Asset Allocation Fund....................................................... 87.6%
Blue Chip Fund.............................................................. 74.9%
Bond Fund................................................................... 71.1%
</TABLE>
The financial statements of each Portfolio, including their portfolio of
investments, are included elsewhere within this report and should be read in
conjunction with each SRF Fund's financial statements.
Seattle-First National Bank ("Seafirst") serves as the Company's
administrator and Concord Financial Group, Inc. (the "Distributor"), a wholly
owned subsidiary of Concord Holding Corp. ("Concord"), serves as the distributor
of the Company's shares.
Effective March 29, 1995, Concord became a wholly owned subsidiary of The
BISYS Group, Inc. ("BISYS").
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the SRF Funds in the preparation of their financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
A) INVESTMENT INCOME, EXPENSES AND REALIZED AND UNREALIZED GAINS AND LOSSES:
The SRF Funds record their proportionate share of the investment income,
expenses and realized and unrealized gains and losses recorded by the
corresponding Portfolio on a daily basis. The investment income, expenses and
realized and unrealized gains and losses are allocated daily to investors in
each Portfolio based upon their investments in each Portfolio.
23
<PAGE> 26
Such investments are adjusted on a daily basis. The valuation of securities by
the Portfolios is discussed in Note 2 to the financial statements of the
Portfolios.
B) FEDERAL INCOME TAXES:
It is the policy of the SRF Funds to meet the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies and to
distribute substantially all of their taxable income to shareholders. Therefore,
no federal income tax provision is required.
C) DIVIDENDS AND DISTRIBUTIONS:
The SRF Funds declare dividends to shareholders of record on the day of
declaration from net investment income. Such dividends are paid quarterly by the
Blue Chip Fund and monthly by the Asset Allocation Fund and the Bond Fund. Net
realized gains, if any, will be distributed at least annually. However, to the
extent that net realized gains of an SRF Fund can be reduced by capital loss
carryovers, such gains will not be distributed. Dividends and distributions are
recorded on the ex-dividend date.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or net
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
D) OTHER:
The SRF Funds incurred certain costs in connection with their organization.
Such costs have been deferred and are being amortized on a straight-line basis
over five years.
Expenses directly attributable to each SRF Fund are charged to that SRF
Fund, while Company expenses attributed to more than one SRF Fund of the Company
are allocated among the respective SRF Funds.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The SRF Funds have an Administration Agreement with Seafirst and a
Distribution Agreement with the Distributor. In addition, Seafirst has entered
into a Sub-Administration Agreement with Concord.
As Administrator, Seafirst assists in supervising the operations of the SRF
Funds. For its services, Seafirst is entitled to a fee, accrued daily and
payable monthly, at an annual rate of 0.29% of each SRF Fund's average daily net
assets. As Sub-Administrator, Concord has agreed to provide officers and certain
administrative and compliance monitoring services to
24
<PAGE> 27
the SRF Funds. For its services, Concord is entitled to a fee, from Seafirst, at
an annual rate of 0.06% of each SRF Fund's average daily net assets. The
Distributor is not entitled to a fee under the Distribution Agreement.
Seafirst has agreed to waive fees payable to it to the extent any SRF Fund's
expenses exceed an annual rate of 0.95% of average daily net assets. For the
year ended February 29, 1996, Seafirst waived $61,604 of fees of the Bond Fund
so the Fund could meet this expense limitation.
The SRF Funds have adopted a Shareholder Service Plan (the "Plan") under
which the SRF Funds pays for non-distribution shareholder servicing expenses
incurred in connection with shares of the Funds. Under the Plan, payments by the
SRF Funds may not exceed an annual rate of 0.25% of each Fund's average daily
net assets. For the year ended February 29, 1996, the SRF Funds paid the
following amounts to Seafirst in connection with the Plan:
<TABLE>
<S> <C>
Asset Allocation Fund.................................................... $ 381,675
Blue Chip Fund........................................................... 448,869
Bond Fund................................................................ 129,465
</TABLE>
For services provided to all three of the SRF Funds constituting the
Company, each Trustee receives an annual fee of $4,000. For the year ended
February 29, 1996 the SRF Funds incurred the following legal charges which were
earned by a law firm, a partner of which serves as Secretary of the Company:
<TABLE>
<S> <C>
Asset Allocation.......................................................... $ 33,176
Blue Chip Fund............................................................ 35,603
Bond Fund................................................................. 35,980
</TABLE>
Certain officers of the Company are "affiliated persons" (as defined in the
Act) of BISYS.
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of the SRF Funds for the year ended February 29, 1996
are summarized below:
<TABLE>
<CAPTION>
ASSET
ALLOCATION BLUE CHIP BOND
---------- ---------- ----------
<S> <C> <C> <C>
Shares subscribed............................ 977,718 1,773,483 300,687
Shares issued to shareholders in reinvestment
of dividends............................... 1,016,950 862,906 275,066
Shares redeemed.............................. (2,171,336) (1,575,254) (1,570,679)
---------- ---------- ----------
Net increase (decrease)...................... (176,668) 1,061,135 (994,926)
========== ========== ==========
</TABLE>
25
<PAGE> 28
Transactions in shares of the SRF Funds for the year ended February 28, 1995
are summarized below:
<TABLE>
<CAPTION>
ASSET
ALLOCATION BLUE CHIP BOND
---------- ---------- ----------
<S> <C> <C> <C>
Shares subscribed............................ 1,590,550 2,042,409 500,832
Shares issued to shareholders in reinvestment
of dividends............................... 868,287 756,038 379,746
Shares redeemed.............................. (2,951,182) (1,570,016) (2,535,451)
---------- ---------- ----------
Net increase (decrease)...................... (492,345) 1,228,431 (1,654,873)
========== ========== ==========
</TABLE>
NOTE 5 -- FEDERAL INCOME TAX STATUS
The Bond Fund had $1,996,470 of capital loss carryovers which may be used to
offset future realized gains on securities transactions to the extent provided
for in the Code. Any such unused capital loss carryovers will expire as follows:
<TABLE>
<S> <C>
2001.................................................................... $1,996,470
</TABLE>
It is anticipated that no distributions of future net realized gains on
investments will be made to shareholders until the capital loss carryovers are
offset by net realized gains or expire.
26
<PAGE> 29
SEAFIRST RETIREMENT FUNDS -- ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR FOR THE PERIOD JAN. 1, 1993
ENDED DEC. 6, 1993 THROUGH YEAR ENDED DECEMBER 31
FEB. 29, YEAR ENDED THROUGH DEC. 5, ------------------------------
1996 FEB. 28, 1995 FEB. 28, 1994 1993(1) 1992(1) 1991(1) 1990(1)
-------- ------------- -------------- -------------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value per
share, beginning of
period................. $ 13.48 $ 13.94 $ 13.86 $ 12.99 $ 12.75 $11.30 $11.47
-------- ------------- ------- ------- -------- ------- -------
Income from Operations:
Net investment income.. 0.47 0.46 0.05 0.43 0.46 0.56 0.62
Net realized and
unrealized gain
(loss) on
investments.......... 2.49 0.12 0.08 0.87 0.24 1.45 (0.17)
-------- ------------- ------- ------- -------- ------- -------
Total income from
investment
operations............. 2.96 0.58 0.13 1.30 0.70 2.01 0.45
-------- ------------- ------- ------- -------- ------- -------
Less Dividends and
Distributions:
Dividends to
shareholders from net
investment income.... (0.47) (0.46) (0.05) (0.43) (0.46) (0.56) (0.62)
Distributions to
shareholders from
capital gains........ (1.01) (0.58) -- -- -- -- --
-------- ------------- ------- ------- -------- ------- -------
Total dividends and
distributions.......... (1.48) (1.04) (0.05) (0.43) (0.46) (0.56) (0.62)
-------- ------------- ------- ------- -------- ------- -------
Net asset value per
share, end of period... $ 14.96 $ 13.48 $ 13.94 $ 13.86 $ 12.99 $12.75 $11.30
============ ============ ============= ============= ======== ======== ========
Total Return............ 22.44 % 4.49% 0.94%** 10.15%** 5.62% 18.11% 4.21%
Ratios/Supplemental
Data:
Net assets, end of
period (000)......... $158,485 $ 145,132 $156,955 $149,719 $106,822 $47,825 $23,608
Ratio of expenses to
average net assets..... 0.94%* 0.78%* 0.95%+* 0.95%+ 0.95% 0.95% 0.58%
Ratio of net investment
income to average net
assets................. 3.19%* 3.40%* 2.64%+* 3.47%+ 3.68% 4.72% 5.58%
Portfolio turnover
rate................... NA NA NA 79% 171% 124% 121%
<FN>
- ---------------
* Reflects the Fund's proportionate share of the Portfolio's expenses and fee
waivers and expense reimbursements by the Portfolio's Investment Adviser and
Administrator and the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursements had the effect of reducing the ratio of expenses
to average net assets and increasing the ratio of net investment income to
average net assets by 0.48%, 0.60%, and 0.69% (annualized) for the periods
ended February 29, 1996, February 28, 1995, and February 28, 1994,
respectively.
** For the period indicated, not annualized.
+ Annualized.
(1) Represents activity of the Fund prior to its reorganization from the Asset
Allocation Fund of Collective Investment Trust for Seafirst Retirement
Accounts. Since the operation and organization of the Fund was changed upon
reorganization, this activity may not be reflective of activity after the
reorganization.
NA -- Not applicable.
</TABLE>
See Notes to Financial Statements.
27
<PAGE> 30
SEAFIRST RETIREMENT FUNDS -- BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR FOR THE PERIOD JAN. 1, 1993
ENDED DEC. 6, 1993 THROUGH YEAR ENDED DECEMBER 31,
FEB. 29, YEAR ENDED THROUGH DEC. 5, -----------------------------
1996 FEB. 28, 1995 FEB. 28, 1994 1993(1) 1992(1) 1991(1) 1990(1)
-------- ------------- -------------- -------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value per
share, beginning of
period................. $ 17.35 $ 17.75 $ 17.34 $ 15.65 $15.17 $12.68 $13.35
-------- ------------- ------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income.. 0.31 0.28 0.05 0.29 0.30 0.33 0.44
Net realized and
unrealized gain
(loss) on
securities........... 5.35 0.88 0.37 1.69 0.48 2.49 (0.67)
-------- ------------- ------- ------- ------- ------- -------
Total income (loss) from
investment
operations............. 5.66 1.16 0.42 1.98 0.78 2.82 (0.23)
-------- ------------- ------- ------- ------- ------- -------
Less Dividends and
Distributions:
Dividends to
shareholders from net
investment income.... (0.31) (0.26) (0.01) (0.29) (0.30) (0.33) (0.44)
Distributions to
shareholders from
capital gains........ (1.61) (1.30) -- -- -- -- --
-------- ------------- ------- ------- ------- ------- -------
Total dividends and
distributions.......... (1.92) (1.56) (0.01) (0.29) (0.30) (0.33) (0.44)
-------- ------------- ------- ------- ------- ------- -------
Net asset value per
share, end of period... $ 21.09 $ 17.35 $ 17.75 $ 17.34 $15.65 $15.17 $12.68
============ ============ ============= ============= ======== ======== ========
Total Return............ 33.37% 6.95% 2.42%** 12.74%** 5.16% 22.52% (1.79)%
Ratios/Supplemental
Data:
Net assets, end of
period (000)......... $206,220 $ 151,267 $132,916 $123,257 $96,206 $49,838 $24,727
Ratio of expenses to
average net assets... 0.95%* 0.82%* 0.95%+* 0.95%+ 0.95% 0.95% 0.57%
Ratio of net investment
income to average net
assets............... 1.53%* 1.64%* 1.28%+* 1.91%+ 2.08% 2.37% 3.40%
Portfolio turnover
rate................... NA NA NA 4% 27% 16% 22%
<FN>
- ---------------
* Reflects the Fund's proportionate share of the Portfolio's expenses and fee
waivers and expense reimbursements by the Portfolio's Investment Adviser and
Administrator and the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursements had the effect of reducing the ratio of expenses
to average net assets and increasing the ratio of net investment income to
average net assets by 0.59%, 0.80% and 0.93% (annualized) for the periods
ended February 29, 1996, February 28, 1995, and February 28, 1994,
respectively.
** For the period indicated, not annualized.
+ Annualized.
(1) Represents activity of the Fund prior to its reorganization from the Blue
Chip Fund of Collective Investment Trust for Seafirst Retirement Accounts.
Since the operation and organization of the Fund was changed upon
reorganization, this activity may not be reflective of activity after the
reorganization.
NA -- Not applicable.
</TABLE>
See Notes to Financial Statements.
28
<PAGE> 31
SEAFIRST RETIREMENT FUNDS -- BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR FOR THE PERIOD JAN. 1, 1993
ENDED DEC. 6, 1993 THROUGH YEAR ENDED DECEMBER 31,
FEB. 29, YEAR ENDED THROUGH DEC. 5, ---------------------------
1996 FEB. 28, 1995 FEB. 28, 1994 1993(1) 1992(1) 1991(1) 1990(1)
-------- ------------- -------------- -------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value per
share, beginning of
period.................. $ 10.48 $ 11.00 $ 11.14 $ 10.99 $11.01 $10.40 $10.30
-------- ------ ------ ------ ------- ------- -------
Income from Investment
Operations:
Net investment income... 0.64 0.61 0.12 0.58 0.67 0.72 0.82
Net realized and
unrealized gain (loss)
on securities......... 0.39 (0.46) (0.14) 0.15 (0.02 ) 0.61 0.10
-------- ------ ------ ------ ------- ------- -------
Total income (loss) from
investment operations... 1.03 0.15 (0.02) 0.73 0.65 1.33 0.92
-------- ------ ------ ------ ------- ------- -------
Less Dividends and
Distributions:
Dividends to
shareholders from net
investment income..... (0.64) (0.61) (0.12) (0.58) (0.67) (0.72) (0.82)
Distributions to
shareholders from
capital gains......... -- (0.06) -- -- -- -- --
-------- ------ ------ ------ ------- ------- -------
Total dividends and
distributions........... (0.64) (0.67) (0.12) (0.58) (0.67) (0.72) (0.82)
-------- ------ ------ ------ ------- ------- -------
Net asset value per
share, end of period.... $ 10.87 $ 10.48 $ 11.00 $ 11.14 $10.99 $11.01 $10.40
============ ============ ============= ============= ======== ======== ========
Total Return............. 9.90% 1.57% (0.23)%** 6.80%** 6.04% 13.28% 9.43%
Ratios/Supplemental Data:
Net assets, end of
period (000).......... $47,062 $55,791 $ 76,773 $ 82,970 $73,826 $53,469 $9,445
Ratio of expenses to
average net assets.... 0.95%* 0.83%* 0.95%+* 0.95%+ 0.95% 0.66% 0.00%
Ratio of net investment
income to average net
assets................ 5.74%* 5.64%* 4.38%+* 5.60%+ 6.15% 7.13% 8.31%
Portfolio turnover
rate.................... NA NA NA 95% 154% 197% 113%
<FN>
- ---------------
* Reflects the Fund's proportionate share of the Portfolio's expenses and fee
waivers and expense reimbursements by the Portfolio's Investment Adviser and
Administrator and the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursements had the effect of reducing the ratio of expenses
to average net assets and increasing the ratio of net investment income to
average net assets by 0.61%, 0.58% and 0.84% (annualized) for the periods
ended February 29, 1996, February 28, 1995, and February 28, 1994
respectively.
** For the period indicated, not annualized.
+ Annualized.
(1) Represents activity of the Fund prior to its reorganization from the Bond
Fund of Collective Investment Trust for Seafirst Retirement Accounts. Since
the operation and organization of the Fund was changed upon reorganization,
this activity may not be reflective of activity after the reorganization.
NA -- Not applicable.
</TABLE>
See Notes to Financial Statements.
29
<PAGE> 32
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees
and Shareholders of
Seafirst Retirement Funds
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Asset Allocation Fund, the Blue Chip Fund, and the Bond Fund (constituting
Seafirst Retirement Funds, hereafter referred to as the "Funds") at February 29,
1996, the results of each of their operations for the year then ended, the
changes in each of their net assets and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
the "financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above. The financial highlights for the period January 1, 1993 through December
5, 1993 and for each of the three years in the period ended December 31, 1992
were audited by other independent accountants whose report dated December 30,
1993 expressed an unqualified opinion on those financial highlights.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
April 25, 1996
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
-------------------------------------------------------------
For the year ended February 29, 1996, the Asset Allocation Fund paid to
shareholders $0.66265 per share from long-term capital gains.
For the year ended February 29, 1996, the Blue Chip Fund paid to
shareholders $1.1677 per share from long-term capital gains.
- --------------------------------------------------------------------------------
30
<PAGE> 33
MASTER INVESTMENT TRUST, SERIES I --
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- --------- ------------
<S> <C> <C>
COMMON STOCKS
AEROSPACE -- 0.9%
Boeing Co. ......................................................... 19,000 $ 1,541,375
------------
AIRLINES & FREIGHT -- 0.2%
AMR Corp. .......................................................... 4,500 394,875
------------
ALUMINIUM/STEEL -- 0.2%
Worthington Industry Inc. .......................................... 20,000 430,000
------------
AUTOMOTIVE -- 1.0%
Echlin, Inc. ....................................................... 12,300 416,663
General Motors Corp. ............................................... 25,800 1,322,250
------------
1,738,913
------------
BANKS -- 3.3%
Chase Manhattan Corp. .............................................. 10,000 745,000
CitiCorp............................................................ 32,400 2,527,200
First Interstate BanCorp............................................ 6,800 1,110,950
Fleet Financial Group Inc. ......................................... 41,000 1,686,125
------------
6,069,275
------------
BUSINESS EQUIPMENT/SERVICES -- 1.3%
Cisco Systems....................................................... 24,600 1,168,500
Hewlett Packard Co. ................................................ 12,000 1,209,000
------------
2,377,500
------------
CHEMICALS -- 1.7%
Corning, Inc. ...................................................... 13,400 435,500
Dow Chemical Co. ................................................... 4,000 321,000
E.I. Du Pont de Nemours & Co. ...................................... 9,700 742,050
Monsanto Corp. ..................................................... 6,300 848,138
Sigma Adrich Corp. ................................................. 11,900 681,275
------------
3,027,963
------------
CONSUMER CYCLICAL -- 0.5%
Armstrong World Industries.......................................... 15,200 891,100
------------
CONSUMER STAPLES -- 5.6%
Coca-Cola Co. ...................................................... 23,400 1,889,550
Conagra Inc. ....................................................... 19,600 825,650
Pepsico Inc. ....................................................... 18,700 1,182,775
Philip Morris Cos, Inc. ............................................ 17,700 1,752,300
Procter & Gamble Co. ............................................... 17,000 1,394,000
Whitman Corp. ...................................................... 27,600 641,700
Ralston Purina Co. ................................................. 7,800 522,600
Sysco Corp. ........................................................ 27,000 887,625
Anheuser Busch Companies Inc. ...................................... 14,900 1,003,888
------------
10,100,088
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
31
<PAGE> 34
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- --------- ------------
<S> <C> <C>
COSMETICS & HOUSEHOLD PRODUCTS -- 1.2%
Colgate-Palmolive Co. .............................................. 4,600 $ 359,950
Gillette Co. ....................................................... 14,800 801,050
Johnson & Johnson................................................... 4,000 374,000
Newell Co. ......................................................... 23,000 638,250
------------
2,173,250
------------
DIVERSIFIED MANUFACTURING -- 4.3%
Alco Standard Corp. ................................................ 53,000 2,510,875
General Electric Co. ............................................... 49,000 3,699,500
Illinois Tool Works, Inc. .......................................... 23,000 1,515,125
------------
7,725,500
------------
DRUGS BIOTECHNOLOGY -- 3.6%
American Home Products Corp. ....................................... 10,500 1,034,250
Amgen, Inc. ........................................................ 10,000 597,500
Bristol-Meyers...................................................... 15,800 1,344,975
Lilly (Eli), and Co. ............................................... 19,800 1,197,900
Medtronic Inc. ..................................................... 8,100 464,738
Pfizer Inc. ........................................................ 16,600 1,093,525
Schering Plough Corp. .............................................. 10,400 583,700
Warner Lambert Co. ................................................. 2,700 266,962
------------
6,583,550
------------
DRUG & HOSPITAL SUPPLIES -- 0.5%
Baxter International, Inc. ......................................... 21,200 969,900
------------
ELECTRICAL & OTHER ELEC. EQUIPMENT -- 0.7%
Emerson Electric Co. ............................................... 17,600 1,370,600
------------
ELECTRIC UTILITIES -- 1.1%
Central & Southwest Corp. .......................................... 30,500 846,375
Duke Power Co. ..................................................... 14,200 694,025
Northern STS PWR Minnesota.......................................... 10,300 507,275
------------
2,047,675
------------
ELECTRONIC COMPUTERS -- 1.9%
Amp, Inc. .......................................................... 19,500 831,188
Intel Corp. ........................................................ 36,000 2,117,250
Motorola, Inc. ..................................................... 10,700 580,475
------------
3,528,913
------------
FINANCE SERVICES -- 3.1%
American Express.................................................... 45,000 2,070,000
Dun & Bradstreet Corp. ............................................. 3,300 208,725
Household International Inc. ....................................... 33,000 2,219,250
Dean Witter......................................................... 20,200 1,085,750
------------
5,583,725
------------
FOREST PRODUCTS -- 0.2%
Wayerhaeuser Co. ................................................... 9,500 402,563
------------
GAS UTILITIES -- 0.7%
Pacific Enterprises, Inc. .......................................... 36,200 968,350
Eastern Enterprises................................................. 11,000 389,125
------------
1,357,475
------------
HEALTH CARE -- 1.6%
Abbot Laboratories.................................................. 27,000 1,127,250
Merck & Co., Inc. .................................................. 18,200 1,205,750
US Healthcare, Inc. ................................................ 10,000 487,500
------------
2,820,500
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
32
<PAGE> 35
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- --------- ------------
<S> <C> <C>
INDUSTRIAL INORGANIC CHEMICALS -- 0.4%
Silicon Graphics.................................................... 29,700 $ 742,500
------------
LEISURE -- 0.7%
Walt Disney Co. .................................................... 11,300 740,150
Hilton Hotels Corp. ................................................ 3,900 365,625
Mattel, Inc. ....................................................... 5,600 186,200
------------
1,291,975
------------
LIFE INSURANCE -- 0.4%
Chubb Corp. ........................................................ 6,900 670,163
------------
MACHINE EQUIPMENT -- 0.6%
Deere & Co. ........................................................ 26,500 1,036,813
------------
MEDIA -- 1.1%
Capital Cities/ABC, Inc. ........................................... 4,000 507,000
Gannett, Inc. ...................................................... 4,100 278,800
McGraw Hill, Inc. .................................................. 4,700 410,663
Time Warner, Inc. .................................................. 9,600 410,400
Tribune Co. New..................................................... 6,300 420,525
------------
2,027,388
------------
MINING -- 0.3%
Newmont Mining Corp. ............................................... 9,500 540,313
------------
MULTI INDUSTRY -- 1.6%
TRW Inc. ........................................................... 17,000 1,472,625
Tyco Labs Inc. ..................................................... 37,000 1,336,625
------------
2,809,250
------------
MULTI INSURANCE -- 1.7%
American International Group........................................ 12,750 1,231,969
General Re Corp. ................................................... 5,500 791,312
Providian Corp. .................................................... 21,800 1,008,250
------------
3,031,531
------------
OIL -- DOMESTIC & CRUDE -- 4.2%
Amoco Corp. ........................................................ 8,900 618,550
Coastal Corp. ...................................................... 27,300 1,003,275
Exxon Corp. ........................................................ 24,500 1,947,750
Texaco Inc. ........................................................ 9,000 717,750
USX Marathon Group.................................................. 41,800 773,300
Mobil Corp. ........................................................ 9,200 1,008,550
Halliburton Co. .................................................... 17,500 960,313
Schlumberger Ltd. .................................................. 8,900 648,588
------------
7,678,076
------------
PAPER & ALLIED PRODUCTS -- 0.4%
Federal Paper Board Co., Inc. ...................................... 4,800 256,200
Mead Corp. ......................................................... 9,000 450,000
------------
706,200
------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.3%
Eastman Kodak Co. .................................................. 6,900 493,350
RAILROADS -- 0.7%
Union Pacific Corp. ................................................ 9,600 633,600
Burlington Northern Santa Fe C...................................... 8,400 672,000
------------
1,305,600
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
33
<PAGE> 36
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- --------- ------------
<S> <C> <C>
RESTAURANTS -- 0.4%
McDonald's Corp. ................................................... 13,150 $ 657,500
------------
RETAIL -- 2.8%
Home Depot Inc. .................................................... 24,000 1,038,000
Nordstrom, Inc. .................................................... 14,600 658,825
Price/Costco Inc. .................................................. 49,500 853,875
Wal Mart Stores Inc. ............................................... 64,100 1,362,125
May Dept. Stores Co. ............................................... 24,000 1,119,000
------------
5,031,825
------------
SOFTWARE SERVICES -- 1.7%
Automatic Data Processing, Inc. .................................... 16,800 651,000
Microsoft Corp. .................................................... 24,000 2,368,500
------------
3,019,500
------------
TECHNOLOGY -- 1.5%
International Business Machines..................................... 16,000 1,962,000
National Semiconductor Corp. ....................................... 44,700 698,440
------------
2,660,440
------------
TELEPHONE -- 3.4%
AT&T................................................................ 32,800 2,086,900
Bellsouth Corp. .................................................... 17,200 685,850
GTE Corp. .......................................................... 29,500 1,264,813
MCI Communications Corp. ........................................... 24,500 716,625
SBC Communications Corp. ........................................... 21,700 1,190,787
Tele-Communications, Inc. .......................................... 8,300 174,300
------------
6,119,275
------------
TIRE AND RUBBER -- 0.1%
Cooper Tire and Rubber Co........................................... 11,100 281,660
------------
Total Common Stocks -- 55.9%
(cost $84,556,256).................................................. 101,238,092
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE 2)
- ------------------------------------------------ ----- --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
U.S. TREASURY BONDS -- 6.5%
U.S. Treasury Bond............................. 10.38% 11/15/12 $ 8,800 $ 11,669,855
------------
U.S. TREASURY NOTES -- 8.4%
U.S. Treasury Note............................. 5.75% 8/15/03 6,400 6,300,671
U.S. Treasury Note............................. 7.88% 11/15/04 8,000 8,930,478
------------
15,231,149
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS -- 14.9%
(cost $27,291,693)............................. 26,901,004
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 10.0%
Federal Home Loan Mortgage Corporation
Pool #G10304................................. 6.50% 4/01/09 946 937,478
Federal Home Loan Mortgage Corporation
Pool #E60891................................. 6.50% 7/01/10 3,343 3,311,369
Federal Home Loan Mortgage Corporation
Pool #297505................................. 8.00% 6/01/17 17 17,148
Federal Home Loan Mortgage Corporation
Pool #53301.................................. 10.50% 4/01/19 35 38,110
Federal Home Loan Mortgage Corporation
Pool #544066................................. 8.00% 12/01/19 17 16,880
FNCI 6.5%TBA................................... 6.50% 3/15/11 5,000 4,950,000
</TABLE>
- ---------------
See Notes to Financial Statements.
34
<PAGE> 37
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE 2)
----------- ----- --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- (CONTINUED)
FGLMC Pool #D67963............................. 6.50% 1/01/26 $ 9,100 $ 8,787,188
Government National Mortgage Association
Pool #146301................................. 10.00% 2/15/16 98 108,237
------------
Total U.S. Government Agency Obligations
(cost $18,454,981)............................. 18,166,410
------------
TAXABLE MUNICIPAL BONDS -- 0.5%
ALASKA --
Alaska State, Housing Finance Authority, Series
G............................................ 10.55% 1/15/18 115 113,419
------------
ILLINOIS --
Cook County, General Obligation Bond........... 5.00% 11/15/23 800 722,000
------------
Total Taxable Municipal Bonds
(cost $836,299)................................ 835,419
------------
CORPORATE OBLIGATIONS -- 9.0%
CORPORATE BONDS -- 1.9%
Hertz Corp. ................................... 6.00% 1/15/03 2,500 2,421,875
Lehman Brothers................................ 5.75% +11/15/98 1,000 981,250
------------
3,403,125
------------
MEDIUM TERM NOTES -- 7.1%
Chrysler Finance Corp. ........................ 5.48% 2/23/99 2,500 2,468,750
Morgan Stanley Group........................... 5.63% 3/01/99 1,500 1,483,125
Ford Motor Credit.............................. 8.38% 1/15/00 3,000 3,217,500
International Lease Finance.................... 5.71% 2/01/00 1,600 1,570,000
Province of Quebec............................. 7.98% 4/01/99 3,000 3,161,250
Philip Morris.................................. 8.75% 3/12/98 1,000 1,055,000
------------
12,955,625
------------
Total Corporate Obligations
(cost $16,452,588)............................. 16,358,750
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.4%
Discover Credit Card Trust..................... 7.85% +11/20/98 3,000 3,148,200
Prime Credit Card Master Trust................. 7.05% +12/15/97 3,000 3,071,089
NationsBank Credit Card Master................. 6.45% 4/15/03 3,500 3,563,760
Merrill Lynch & Co. ........................... 6.85% 4/15/12 8 7,734
------------
Total Collateralized Mortgage Obligations
(cost $9,733,978).............................. 9,790,783
------------
COMMERCIAL PAPER DISCOUNT -- 3.9%
Brown Forman................................... 5.50% 3/01/96 3,500 3,500,000
Merrill Lynch.................................. 5.47% 3/01/96 3,500 3,500,000
------------
Total Commercial Paper Discount
(cost $7,000,000) 7,000,000
------------
TOTAL INVESTMENTS -- 99.6%
(COST $164,325,795)............................ 180,290,458
Other Assets In Excess Of Liabilities -- 0.4%... 763,956
------------
NET ASSETS -- 100%.............................. $181,054,414
============
</TABLE>
- ---------------
See Notes to Financial Statements.
35
<PAGE> 38
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- --------- ------------
<S> <C> <C>
COMMON STOCKS
AEROSPACE/DEFENSE -- 2.5%
Lockheed Martin Corp. .............................................. 38,500 $ 2,935,625
General Dynamics Corp. ............................................. 28,700 1,711,238
Rockwell Intl., Corp. .............................................. 38,600 2,200,200
------------
6,847,063
------------
AIRLINES & FREIGHT -- 0.4%
AMR Corp. .......................................................... 11,800 1,035,450
------------
APPAREL/TEXTILE -- 0.5%
Nike, Inc. ......................................................... 19,800 1,284,525
------------
AUTOMOTIVE -- 2.7%
Chrysler Corp. ..................................................... 55,600 3,134,450
Goodyear Tire & Rubber Co. ......................................... 53,500 2,541,250
Johnson Controls, Inc. ............................................. 23,500 1,686,125
------------
7,361,825
------------
BANKS -- 7.6%
Citicorp............................................................ 78,900 6,154,200
First Interstate Bancorp............................................ 18,500 3,022,438
First Union Corp. .................................................. 47,000 2,843,500
Bank Of Boston Inc. ................................................ 78,400 3,812,200
Bank Of New York Inc. .............................................. 65,400 3,392,625
Nations Bank Corporation............................................ 23,200 1,711,000
------------
20,935,963
------------
BUILDING RELATED/APPLIANCE -- 0.5%
Fleetwood Enterprises............................................... 46,700 1,255,063
------------
BUSINESS EQUIPMENT/SERVICES -- 2.6%
Cisco Systems....................................................... 69,900 3,320,250
Hewlett Packard Co. ................................................ 37,400 3,768,050
------------
7,088,300
------------
CHEMICALS -- 3.2%
Eastman Chemical Co. ............................................... 35,700 2,570,400
Morton International,Inc. .......................................... 31,600 1,196,850
E.I. Du Pont De Nemours & Co. ...................................... 29,500 2,256,750
Monsanto Corp. ..................................................... 20,000 2,692,500
------------
8,716,500
------------
CONSUMER STAPLES -- 7.8%
Coca-Cola Co. ...................................................... 54,400 4,392,800
Conagra Inc. ....................................................... 54,800 2,308,450
Pepsico Inc. ....................................................... 105,700 6,685,525
Philip Morris Cos, Inc. ............................................ 57,900 5,732,100
Sara Lee Corp. ..................................................... 70,300 2,275,963
------------
21,394,838
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
36
<PAGE> 39
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
------------- --------- ------------
<S> <C> <C>
COSMETICS & HOUSEHOLD PRODUCTS -- 4.6%
Johnson & Johnson................................................... 42,700 $ 3,992,450
Newell Co. ......................................................... 59,200 1,642,800
Bay Networks........................................................ 25,300 1,027,813
Clorox Co. ......................................................... 21,200 1,796,700
Avon Products Inc. ................................................. 26,300 2,113,863
Premark Intl., Inc. ................................................ 38,500 2,016,437
------------
12,590,063
------------
DIVERSIFIED MANUFACTURING -- 3.7%
General Electric Co. ............................................... 72,300 5,458,650
United Technologies Corp. .......................................... 44,600 4,794,500
------------
10,253,150
------------
DRUGS BIOTECHNOLOGY -- 5.5%
Medronic Inc. ...................................................... 47,200 2,708,100
Bristol-Meyers...................................................... 52,800 4,494,600
Schering Plough Corp. .............................................. 63,400 3,558,325
Pfizer, Inc. ....................................................... 64,600 4,255,525
------------
15,016,550
------------
ELECTRIC UTILITIES -- 3.5%
Unicom Corp. ....................................................... 75,300 2,409,600
FPL Group, Inc. .................................................... 41,300 1,843,013
General Public Utilities Corp. ..................................... 80,800 2,696,700
DTE Energy Co. ..................................................... 78,400 2,793,000
------------
9,742,313
------------
ELECTRICAL & OTHER ELEC EQUIPMENT -- 0.5%
Applied Materials, Inc. ............................................ 35,100 1,254,825
------------
ELECTRONIC COMPUTERS -- 3.3%
Intel Corp. ........................................................ 37,600 2,211,350
Compaq Computer Corp. .............................................. 42,600 2,156,625
Oracle Corp. ....................................................... 57,900 3,010,800
Sun Microsystems Inc. .............................................. 29,500 1,548,750
------------
8,927,525
------------
ENERGY RELATED -- 0.9%
Halliburton Co. .................................................... 44,200 2,425,475
------------
ENTERTAINMENT -- 0.4%
King World Productions, Inc. Ltd.................................... 26,500 1,109,688
------------
FINANCIAL SERVICES -- 1.1%
Travelers Group..................................................... 44,800 2,996,000
------------
FOODS -- 1.2%
Campbell Soup Co. .................................................. 53,200 3,285,100
------------
FOREST PRODUCTS -- 1.5%
Bemis Co. Inc. ..................................................... 37,800 1,157,625
Kimberly-Clark Corp. ............................................... 40,400 3,085,550
------------
4,243,175
------------
GAS UTILITIES -- 0.9%
Pacific Enterprises, Inc. .......................................... 93,800 2,509,150
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
37
<PAGE> 40
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
------------- --------- ------------
<S> <C> <C>
HEALTH CARE -- 1.6%
Merck & Co., Inc. .................................................. 64,700 $ 4,286,375
------------
HOSPITAL MANAGEMENT -- 1.2%
Columbia Healthcare Corp. .......................................... 24,400 1,335,900
United Healthcare Corp. ............................................ 30,000 1,957,500
------------
3,293,400
------------
HOSPITAL SUPPLY -- 0.8%
Becton Dickinson & Co. ............................................. 28,400 2,328,800
------------
INDUSTRIAL SERVICES -- 0.6%
Fluor Corp. ........................................................ 26,600 1,785,525
------------
INSURANCE -- 1.6%
Aetna Life & Casualty Co. .......................................... 8,100 612,562
Allstate............................................................ 64,497 2,765,309
ITT Hartford Group Inc. ............................................ 21,400 1,102,100
------------
4,479,971
------------
INTERNATIONAL OIL -- 3.3%
Atlantic Richfield Co. ............................................. 20,300 2,222,850
Mobil Corp. ........................................................ 61,700 6,763,863
------------
8,986,713
------------
LEISURE -- 0.9%
Walt Disney Co. .................................................... 38,400 2,515,200
------------
MACHINERY -- 0.7%
Ingersoll Rand Co. ................................................. 49,400 2,019,225
------------
MEDIA -- 1.6%
Capital Cities/ABC, Inc. ........................................... 23,900 3,029,325
Gannett, Inc. ...................................................... 22,400 1,523,200
------------
4,552,525
------------
METALS -- 1.4%
Nucor Corp. ........................................................ 36,600 1,971,825
Phelps Dodge Corp. ................................................. 30,800 1,882,650
------------
3,854,475
------------
MULTI INDUSTRY -- 2.0%
Textron............................................................. 25,300 1,992,375
Honeywell Inc. ..................................................... 65,900 3,492,700
------------
5,485,075
------------
MULTI INSURANCE -- 1.1%
Providian Corp. .................................................... 69,100 3,195,875
------------
OIL - DOMESTIC & CRUDE -- 3.0%
Exxon Corp. ........................................................ 57,600 4,579,200
Amoco Corp. ........................................................ 53,200 3,697,400
------------
8,276,600
------------
PETROLEUM REFINING -- 1.4%
Royal Dutch Petroleum Co. .......................................... 27,600 3,801,900
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
38
<PAGE> 41
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
------------- --------- ------------
<S> <C> <C>
PROPERTY CASUALTY INSURANCE -- 0.6%
Safeco. Corp. ...................................................... 50,500 $ 1,830,625
------------
PUBLISHING -- 0.6%
New York Times Co. ................................................. 63,800 1,754,500
------------
RAIL/TRUCKING FREIGHT -- 1.3%
Norfolk Southern Corp. ............................................. 42,800 3,488,200
------------
RESTAURANTS/LODGING -- 1.7%
McDonald's Corp. ................................................... 38,500 1,925,000
Marriott International Inc. ........................................ 30,900 1,517,963
ITT Corp. .......................................................... 21,400 1,292,025
------------
4,734,988
------------
RETAIL -- 3.9%
Home Depot, Inc. ................................................... 52,400 2,266,300
Sears Roebuck & Co. ................................................ 104,700 4,750,762
Gap, Inc. .......................................................... 67,500 3,619,688
------------
10,636,750
------------
RETAIL FOOD & DRUG -- 1.0%
American Stores Co. ................................................ 98,500 2,868,813
------------
SECURITIES, BROKERS & DEALERS -- 1.0%
Dean Witter......................................................... 52,500 2,821,875
------------
SOFTWARE SERVICES -- 1.6%
Microsoft Inc. ..................................................... 45,900 4,529,756
------------
TECHNOLOGY -- 2.8%
International Business Machines..................................... 39,900 4,892,738
National Semiconductor Corp. ....................................... 56,400 881,250
Harris Corp. ....................................................... 16,800 1,117,200
Texas Instruments Inc. ............................................. 18,600 927,675
------------
7,818,863
------------
TELEPHONE -- 7.0%
AT & T.............................................................. 67,900 4,320,138
Bellsouth Corp. .................................................... 120,200 4,792,975
GTE Corp. .......................................................... 76,400 3,275,650
Nynex Corp. ........................................................ 59,800 3,079,700
Ameritech Corp. .................................................... 65,600 3,780,200
------------
19,248,663
------------
TELEPHONE & TELEGRAPH APPARATUS -- 1.2%
Sprint Corp. ....................................................... 75,700 3,255,100
------------
Total Common Stocks -- 98.8%
(cost $225,698,360 )................................................ 272,122,328
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
39
<PAGE> 42
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
DESCRIPTION (000) (NOTE 2)
------------- --------- ------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 3.0%
U.S. Treasury Bill 4.62%............................................. 2,230 $ 2,222,273
U.S. Treasury Bill 4.57%............................................. 805 802,241
U.S. Treasury Bill 4.57%............................................. 795 792,275
U.S. Treasury Bill 4.73%............................................. 306 304,633
U.S. Treasury Bill 4.74%............................................. 370 366,840
U.S. Treasury Bill 4.80%............................................. 460 456,072
U.S. Treasury Bill 4.86%............................................. 1,503 1,490,164
U.S. Treasury Bill 4.87%............................................. 347 344,037
U.S. Treasury Bill 4.88%............................................. 349 346,020
U.S. Treasury Bill 4.79%............................................. 1,211 1,200,657
------------
Total U.S. Government Obligations
(cost $8,326,185).................................................... 8,325,212
------------
TOTAL INVESTMENTS -- 101.8% $280,447,540
(COST $234,024,545)
Other Liabilities In Excess Of Assets -- (1.8)% (4,925,266)
------------
NET ASSETS -- 100%.................................................... $275,522,274
==============
</TABLE>
- ---------------
See Notes to Financial Statements.
40
<PAGE> 43
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/MOODY'S PRINCIPAL
RATINGS MATURITY AMOUNT VALUE
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
CORPORATE OBLIGATIONS -- 15.4%
Household International BV....... AB/A 5.25% 10/15/98 $ 2,000 $ 1,970,000
MCI Communications Corp. ........ A2/A- 6.25% 3/23/99 2,000 2,017,500
American Brands.................. A2/A 7.50% 5/15/99 1,000 1,038,750
Ford Motor Credit................ A1/A+ 9.50% 4/15/00 2,500 2,790,625
Hertz Corp. ..................... AB/A 6.00% 1/15/03 2,500 2,421,875
-----------
10,238,750
-----------
COMMERCIAL PAPER DISCOUNT -- 2.6%
Brown Forman..................... A-1/P-1 5.50% 3/01/96 1,760 1,760,000
-----------
MEDIUM TERM NOTES -- 17.5%
Chrysler Financial Corp. ........ AB/A- 6.60% 8/03/98 2,000 2,027,500
International Lease Finance...... A2/A+ 6.27% 2/10/99 2,500 2,515,625
Morgan Stanley Group............. A1/A+ 5.63% 3/01/99 2,000 1,977,500
General Motors Acceptance
Corp. ......................... A3/A- 7.38% 5/26/99 2,000 2,072,500
Associates Corp. ................ Aa3/AA- 6.35% 6/29/00 3,000 3,022,500
-----------
11,615,625
-----------
U.S. TREASURY NOTES -- 35.8%
U.S. Treasury Notes.............. Treasury 5.13% 11/30/98 7,900 7,816,812
U.S. Treasury Notes.............. Treasury 6.88% 8/31/99 2,000 2,079,380
U.S. Treasury Notes.............. Treasury 7.75% 11/30/99 3,500 3,744,650
U.S. Treasury Notes.............. Treasury 7.75% 1/31/00 2,500 2,680,175
U.S. Treasury Notes.............. Treasury 5.63% 11/30/00 1,500 1,491,210
U.S. Treasury Notes.............. Treasury 5.75% 8/15/03 6,000 5,906,879
-----------
23,719,106
-----------
U.S. TREASURY BONDS -- 7.3%
U.S.Treasury Bonds............... Treasury 10.38% 11/05/09 3,800 4,845,988
-----------
MUNICIPAL BONDS -- 0.2%
Alaska Housing Series G.......... Aaa/AAA 10.55% 1/15/18 110 108,488
-----------
COLLATERALIZED MORTGAGE OBLIGATION -- 12.5%
Standard Credit Card Master
Trust.......................... Aaa/AAA 7.85% 2/07/02 2,500 2,664,500
NationsBank Credit Card Master
Trust.......................... Aaa/AAA 6.45% 4/15/03 2,700 2,749,186
Merrill Lynch Mtg Inv. Inc. ..... Aaa/AAA 6.85% 4/15/12 16 16,434
Discover Credit Card Trust....... Aaa/AAA 7.85% 11/20/98 2,700 2,833,380
-----------
8,263,500
-----------
U.S. GOVERNMENT AGENCY NOTES -- 7.0%
FNCX. Pool #303528............... Treasury 6.00% 8/01/01 2,491 2,461,742
Federal National Mortgage
Association Pool #131579....... Treasury 6.50% 7/01/04 240 231,770
Federal National Mortgage
Association Pool #286087....... Treasury 8.00% 6/01/24 872 894,218
Federal Home Loan Mortgage Corp.
Pool #160034................... Treasury 8.5% 12/01/07 76 78,750
</TABLE>
- ---------------
See Notes to Financial Statements.
41
<PAGE> 44
<TABLE>
<CAPTION>
S&P/MOODY'S PRINCIPAL
RATINGS MATURITY AMOUNT VALUE
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY NOTES -- (CONTINUED)
Federal Home Loan Mortgage Corp.
Pool #549837................... Treasury 8.0% 7/01/10 $ 241 $ 245,406
Federal Home Loan Mortgage Corp.
Pool #284343................... Treasury 8.0% 12/01/16 17 17,227
Federal Home Loan Mortgage Corp.
Pool #297505................... Treasury 8.0% 6/01/17 25 25,327
Government National Mortgage
Assoc. Pool #136688............ Treasury 10.00% 9/15/15 38 41,779
Government National Mortgage
Assoc. Pool #166744............ Treasury 10.00% 7/15/16 361 398,893
Government National Mortgage
Assoc. Pool #209480............ Treasury 10.00% 7/15/17 81 89,483
Government National Mortgage
Assoc. Pool #227082............ Treasury 10.00% 8/15/17 115 126,636
-----------
4,611,231
-----------
TOTAL INVESTMENTS -- 98.3%
(COST $65,110,819)............... 65,162,688
Other Assets in excess of Liabilities -- 1.7% 1,126,887
-----------
NET ASSETS -- 100.0%.............. $66,289,575
=============
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 45
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET INVESTMENT
ALLOCATION BLUE CHIP GRADE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities at value
(cost
$164,325,795, $234,024,545 and
$65,110,819 respectively)............ $180,290,458 $280,447,540 $65,162,688
Cash................................... 66,207 36,086 85,452
Receivable for investment securities
sold................................. 5,307,998 -- --
Contribution receivable................ 262,293 1,441,870 164,227
Dividends receivable................... 243,397 603,862 --
Interest receivable.................... 870,288 -- 930,804
Deferred organization costs and prepaid
expenses............................. 41,137 42,390 39,209
------------ ------------ -----------
Total assets............................. 187,081,778 282,571,748 66,382,380
------------ ------------ -----------
LIABILITIES:
Withdrawal payable..................... 200,358 147,114 46,142
Payable for investment securities
purchased............................ 5,731,750 6,761,140 --
Advisor fees payable................... 37,278 75,382 --
Administration fees payable............ 3,384 5,024 --
Accrued accounting fees................ 15,596 17,633 5,113
Accrued audit fees..................... 16,095 15,958 15,666
Accrued custody fees................... 5,303 6,624 2,118
Accrued legal fees..................... 6,868 6,707 6,049
Other accrued expenses................. 10,732 13,892 17,717
------------ ------------ -----------
Total liabilities........................ 6,027,364 7,049,474 92,805
------------ ------------ -----------
NET ASSETS............................... $181,054,414 $275,522,274 $66,289,575
============ ============ ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 46
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Operations
For the year ended February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET INVESTMENT
ALLOCATION BLUE CHIP GRADE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................. $ 4,919,733 $ 427,131 $3,989,704
Dividends................................ 1,936,890 4,764,288 --
----------- ----------- ----------
6,856,623 5,191,419 3,989,704
----------- ----------- ----------
EXPENSES:
Advisory fees............................ 913,660 1,574,388 269,135
Administration fees...................... 83,060 104,889 30,769
Fund accounting fees and expenses........ 122,609 134,230 44,790
Custodian fees and expenses.............. 30,446 38,672 12,697
Audit fees............................... 22,305 18,423 17,687
Legal fees............................... 17,976 12,848 16,094
Amortization of organization costs....... 13,692 13,615 13,691
Insurance expense........................ 3,637 4,704 1,266
Trustees fees............................ 3,500 3,500 3,500
Other operating expenses................. 5,835 -- --
----------- ----------- ----------
1,216,720 1,905,269 409,629
Less: Fee waivers and expense
reimbursements......................... (785,750) (1,242,250) (299,905)
----------- ----------- ----------
430,970 663,019 109,724
----------- ----------- ----------
Net Investment Income...................... 6,425,653 4,528,400 3,879,980
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on securities
transactions........................... 19,223,012 21,310,546 2,336,008
Net change in unrealized appreciation
(depreciation) on investments.......... 8,662,241 34,689,746 (247,652)
----------- ----------- ----------
Net Gain on Investments.................... 27,885,253 56,000,292 2,088,356
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................... $34,310,906 $60,528,692 $5,968,336
=========== =========== ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 47
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
---------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 6,425,653 $ 6,185,598
Net realized gain (loss) on securities transactions.... 19,223,012 (4,776,038)
Net change in unrealized appreciation/depreciation on
investments.......................................... 8,662,241 5,934,051
------------ ------------
Net increase in net assets resulting from operations... 34,310,906 7,343,611
------------ ------------
Trust Share Transactions:
Contributions.......................................... 31,372,458 18,683,561
Withdrawals............................................ (35,499,213) (32,967,230)
------------ ------------
Net decrease in net assets resulting from Trust share
transactions......................................... (4,126,755) (14,283,669)
------------ ------------
Total Increase (Decrease)................................ 30,184,151 (6,940,058)
NET ASSETS:
Beginning of year...................................... 150,870,263 157,810,321
------------ ------------
End of year............................................ $181,054,414 $150,870,263
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
45
<PAGE> 48
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BLUE CHIP PORTFOLIO
---------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 4,528,400 $ 3,333,204
Net realized gain on securities transactions........... 21,310,546 373,340
Net change in unrealized appreciation/depreciation on
investments.......................................... 34,689,746 7,922,681
------------ ------------
Net increase in net assets resulting from operations... 60,528,692 11,629,225
------------ ------------
Trust Share Transactions:
Contributions.......................................... 96,776,148 33,341,186
Withdrawals............................................ (39,120,232) (21,900,310)
------------ ------------
Net increase in net assets resulting from Trust share
transactions......................................... 57,655,916 11,440,876
------------ ------------
Total Increase........................................... 118,184,608 23,070,101
NET ASSETS
Beginning of year...................................... 157,337,666 134,267,565
------------ ------------
End of year............................................ $275,522,274 $157,337,666
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
46
<PAGE> 49
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT GRADE BOND
PORTFOLIO
---------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 3,879,980 $ 4,061,925
Net realized gain (loss) on securities transactions.... 2,336,008 (4,166,543)
Net change in unrealized appreciation/depreciation on
investments.......................................... (247,652) 1,011,785
----------- -----------
Net increase in net assets resulting from operations... 5,968,336 907,167
----------- -----------
Trust Share Transactions:
Contributions.......................................... 21,358,278 4,879,443
Withdrawals............................................ (18,755,421) (25,317,238)
----------- -----------
Net increase(decrease) in net assets resulting from
Trust share transactions............................. 2,602,857 (20,437,795)
----------- -----------
Total Increase (Decrease)................................ 8,571,193 (19,530,628)
NET ASSETS:
Beginning of year...................................... 57,718,382 77,249,010
----------- -----------
End of year............................................ $66,289,575 $57,718,382
=========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
47
<PAGE> 50
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Master Investment Trust, Series I (the "Trust"), a Delaware business trust,
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as an open-end management investment company. At February 29, 1996 the Trust
consisted of four portfolios. The accompanying financial statements and notes
are those of the Blue Chip Portfolio (the "Blue Chip Portfolio"), Investment
Grade Bond Portfolio, (the "Bond Portfolio") and Asset Allocation Portfolio (the
"Asset Allocation Portfolio") (collectively the "Portfolios") only.
The investment objective of the Blue Chip Portfolio is long-term capital
appreciation through investments in blue chip stocks. The investment objective
of the Investment Grade Bond Portfolio is to obtain interest income and capital
appreciation by investing in investment grade intermediate and longer return
bonds, including corporate and governmental fixed income obligations and
mortgage-backed securities. The investment objective of the Asset Allocation
Portfolio is to obtain long term growth from capital appreciation and dividend
and interest income. The Asset Allocation Portfolio seeks to achieve its
objective by actively allocating investments among the three major asset
categories: bonds, equity securities and cash equivalents.
Bank of America National Trust and Savings Association ("Bank of America"),
a wholly owned subsidiary of BankAmerica Corporation, serves as the Portfolios'
Investment Adviser. Concord Holding Corporation ("Concord") serves as the
Portfolios' Administrator through BISYS Fund Services (Ireland) Ltd., a wholly
owned subsidiary of Concord.
Effective March 29, 1995, Concord became a wholly owned subsidiary of The
BISYS Group, Inc., ("BISYS").
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios in the preparation of their financial statements. The policies
are in conformity with generally accepted accounting principles. The preparation
of financial statements in accordance with generally accepted principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
48
<PAGE> 51
A) SECURITY VALUATIONS:
Portfolio securities for which market quotations are readily available
(other than debt securities with remaining maturities of 60 days or less) are
valued at the last reported sales price on the date of valuation or, if none is
available, at the mean between the current quoted bid and asked prices on the
date of valuation. Securities that are primarily traded on the NASDAQ national
securities market are valued at the last reported sales price on the date of
valuation or, if none is available, at the last quoted bid price on the date of
valuation. The Portfolio may use an independent pricing service, approved by the
Board of Trustees, to value certain of its securities. Such prices reflect
market values which may be established through the use of electronic data
processing techniques and matrix systems. Restricted securities and securities
for which market quotations are not readily available, if any, are valued at
fair value using methods approved by the Board of Trustees. Debt securities with
remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a security
at its cost on the date of purchase or, in the case of securities purchased with
more than 60 days until maturity, at their market value each day until the 61st
day prior to maturity, and thereafter assuming a constant amortization to
maturity of the difference between the principal amount due at maturity and such
valuation.
B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are accounted for on a trade date basis. Realized
gains and losses on securities transactions are determined on the identified
cost basis. Interest income, including accretion of discount and amortization of
premium, is accrued daily. Dividend income is recorded on the ex-dividend date.
C) EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while Trust expenses attributable to more than one portfolio of the Trust and
general Trust expenses are allocated among the respective portfolios of the
Trust.
D) FEDERAL INCOME TAXES:
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in the Portfolios will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
Portfolios will be managed in such a way that an investor will be able to
satisfy the requirements of the Internal Revenue Code applicable to regulated
investment companies.
49
<PAGE> 52
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolios have an Investment Advisory Agreement with Bank of America
and an Administration Agreement with Concord.
As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolios. For its services, Bank of America is entitled to a
fee, accrued daily and payable monthly, at an annual rate of 0.55%, 0.75% and
0.45% of the average daily net assets of the Asset Allocation Portfolio, Blue
Chip Portfolio and Bond Portfolio, respectively. For the year ended February 29,
1996, Bank of America waived the following fees as Adviser for each Portfolio.
<TABLE>
<S> <C>
Asset Allocation........................................................ $ 720,259
Blue Chip............................................................... $1,164,328
Bond.................................................................... $ 269,303
</TABLE>
As Administrator, Concord assists in supervising the operations of the
Portfolios. For its services, Concord is entitled to a fee from each Portfolio
accrued daily and payable monthly, at an annual rate of 0.05% of each of the
Portfolio's average daily net assets. For the year ended February 29, 1996,
Concord waived the following fees as Administrator for each Portfolio.
<TABLE>
<S> <C>
Asset Allocation.......................................................... $ 65,491
Blue Chip................................................................. $ 77,922
Bond...................................................................... $ 30,602
</TABLE>
For services provided to all four of the portfolios constituting the Trust,
each Trustee receives an annual fee of $1,500 and a meeting fee of $500. For the
year ended February 29, 1996, the Asset Allocation Portfolio, Blue Chip
Portfolio and Bond Portfolio incurred legal expenses of $17,976, $12,848 and
$16,094, which were earned by a law firm, a partner of which serves as Secretary
of the Trust. Certain officers of the Trust are "affiliated persons" (as defined
in the Act) of BISYS.
50
<PAGE> 53
NOTE 4 -- SECURITIES TRANSACTIONS
During the year ended February 29, 1996, each Portfolio purchased and sold
portfolio securities, excluding short-term securities, in the following amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
ASSET ALLOCATION PORTFOLIO
U.S. Government................................ $ 85,887,588 $ 85,359,727
Other.......................................... 161,276,120 160,698,929
------------ ------------
Total.......................................... 247,163,708 246,058,656
============ ============
BLUE CHIP PORTFOLIO
Total Common Stocks............................ $283,161,200 $219,320,666
============ ============
BOND PORTFOLIO
U.S. Government................................ $ 32,171,911 $ 38,550,500
Other.......................................... 69,941,871 59,104,968
------------ ------------
Total.......................................... 102,113,782 97,655,468
============ ============
</TABLE>
At February 29, 1996, the cost of the securities of the Asset Allocation
Portfolio, Blue Chip Portfolio and Bond Portfolio for federal income tax
purposes was substantially the same as for financial reporting purposes.
Accordingly net unrealized appreciation of investments amounted to $15,964,663,
$46,422,995 and $51,869 respectively, consisting of gross unrealized
appreciation of $18,488,324, $48,183,392 and $618,210, respectively, and gross
unrealized depreciation of $2,523,661, $1,760,397 and $566,341, respectively.
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Asset Allocation Portfolio had the following concentrations by industry
sector at February 29, 1996 (as a percentage of total investments):
<TABLE>
<S> <C>
U. S. Treasury Bonds............................................... 6.5%
U. S. Treasury Notes............................................... 8.5
U. S. Government Agency Obligations................................ 10.1
Taxable Municipal Bonds............................................ 0.4
Medium Term Notes.................................................. 7.2
Corporate Bonds.................................................... 1.9
Collateralized Mortgage Obligations................................ 5.4
Commercial Paper Discount.......................................... 3.9
Aerospace.......................................................... 0.9
Airlines & Freight................................................. 0.2
Aluminium/Steel.................................................... 0.2
Automotive......................................................... 1.0
Banks.............................................................. 3.4
</TABLE>
51
<PAGE> 54
<TABLE>
<S> <C>
Business Equipment/Services........................................ 1.3
Chemicals.......................................................... 1.7
Consumer Cyclical.................................................. 0.5
Consumer Staples................................................... 5.6
Cosmetics & Household Products..................................... 1.2
Diversified Manufacturing.......................................... 4.3
Drugs Biotechnology................................................ 3.6
Drug & Hospital Supplies........................................... 0.5
Electrical & Other Electrical Equipment............................ 0.8
Electric Utilities................................................. 1.1
Electronic Computers............................................... 1.9
Finance Services................................................... 3.1
Forest Products.................................................... 0.2
Gas Utilities...................................................... 0.7
Health Care........................................................ 1.6
Industrial Inorganic Chemicals..................................... 0.4
Leisure............................................................ 0.7
Life Insurance..................................................... 0.4
Machinery Equipment................................................ 0.6
Media.............................................................. 1.1
Mining............................................................. 0.3
Multi Industry..................................................... 1.6
Multi Insurance.................................................... 1.7
Oil -- Domestic & Crude............................................ 4.2
Paper and Allied products.......................................... 0.4
Photographic Equipment & Supplies.................................. 0.3
Railroads.......................................................... 1.3
Restaurants........................................................ 0.4
Retail............................................................. 2.2
Software Services.................................................. 1.7
Technology......................................................... 1.5
Telephone.......................................................... 3.4
Tire & Rubber...................................................... 0.1
-----
100.0%
=====
</TABLE>
52
<PAGE> 55
The Bond Portfolio had the following concentrations by industry sector at
February 29, 1996 (as a percentage of total investments):
<TABLE>
<S> <C>
U.S. Treasury Notes................................................ 36.4%
Medium Term Notes.................................................. 17.8
U.S. Government Treasury Bonds..................................... 7.4
Municipal Bonds.................................................... 0.2
Collateralized Mortgage Obligation................................. 12.7
U.S. Government Agency Notes....................................... 7.1
Commercial Paper Discount.......................................... 2.7
Corporate Obligations.............................................. 15.7
-----
100.0%
=====
</TABLE>
53
<PAGE> 56
MASTER INVESTMENT TRUST, SERIES I --
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR PERIOD
YEAR ENDED ENDED ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
Ratio of expenses to average net
assets**................................. 0.26% 0.17% 0.24%***
Ratio of net investment income to average
net assets**............................. 3.87% 4.01% 3.35%***
Portfolio Turnover......................... 157% 142% 67%
</TABLE>
- ---------------
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.
** Net of fee waivers which had the effect of reducing the ratio of expenses to
average net assets and increasing the ratio of net investment income to
average net assets by 0.47%, 0.60%, and 0.03% (annualized) for the periods
ended February 29, 1996, February 28, 1995, and February 28, 1994,
respectively.
*** Annualized.
See Notes to Financial Statements.
54
<PAGE> 57
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR PERIOD
YEAR ENDED ENDED ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
Ratio of expenses to average net
assets**................................. 0.31% 0.17% 0.27%***
Ratio of net investment income to average
net assets**............................. 2.16% 2.30% 1.97%***
Portfolio Turnover......................... 108% 44% 86%
</TABLE>
- ---------------
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.
** Net of fee waivers which had the effect of reducing the ratio of expenses to
average net assets and increasing the ratio of net investment income to
average net assets by 0.59%, 0.80% and 0.80% (annualized) for the periods
ended February 29, 1996, February 28, 1995 and February 28, 1994,
respectively.
*** Annualized.
See Notes to Financial Statements.
55
<PAGE> 58
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR PERIOD
YEAR ENDED ENDED ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
Ratio of expenses to average net
assets**................................. 0.18% 0.25% 0.41%***
Ratio of net investment income to average
net assets**............................. 6.47% 6.22% 4.93%***
Portfolio Turnover......................... 172% 240% 32%
</TABLE>
- ---------------
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.
** Net of fee waivers which had the effect of reducing the ratio of expenses to
average net assets and increasing the ratio of net investment income to
average net assets by 0.50% for the periods ended February 29, 1996,
February 28, 1995 and February 28, 1994 (annualized) respectively.
*** Annualized.
See Notes to Financial Statements.
56
<PAGE> 59
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees
and Investors of
Master Investment Trust, Series I
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of Master Investment Trust, Series I -- Asset
Allocation Portfolio, Blue Chip Portfolio and Investment Grade Bond Portfolio
(the "Portfolios") at February 29, 1996, the results of each of their operations
for the year then ended, the changes in each of their net assets and the
supplementary data for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at February 29, 1996 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
April 25, 1996
57
<PAGE> 60
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY PRINCIPAL AMORTIZED
N.R.S.R.O. MATURITY AMOUNT COST
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ------------ ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER -- 49.0%
ASSET BACKED -- 2.3%
BANKING -- 2.3%
Asset Securitization Cooperative
Corp.*(a)...................... A1+/P1 5.35% 4/04/96 $ 25,000 $ 24,873,680
Asset Securitization Cooperative
Corp.*(a)...................... A1+/P1 5.28% 4/30/96 25,000 24,780,000
Asset Securitization Cooperative
Corp.*(a)...................... A1+/P1 5.25% 5/09/96 22,800 22,570,575
Asset Securitization Cooperative
Corp.*(a)...................... A1+/P1 5.08% 5/24/96 25,000 24,703,667
Banc One Funding Corp.*(a)....... A1/P1 5.61% 3/08/96 25,000 24,972,729
------------
121,900,651
------------
DOMESTIC -- 41.0%
AGRICULTURE -- 0.4%
Cargill Inc...................... A1+/P1 5.20% 3/22/96 20,000 19,939,333
------------
AUTOMOBILES -- 7.9%
American Honda Finance
Corp. ......................... P1/F1 5.70% 3/01/96 45,000 45,000,000
American Honda Finance
Corp. ......................... P1/F1 5.71% 3/04/96 25,000 24,988,104
American Honda Finance
Corp. ......................... P1/F1 5.20% 4/24/96 19,800 19,645,560
American Honda Finance
Corp. ......................... P1/F1 5.20% 5/01/96 15,892 15,751,974
American Honda Finance
Corp. ......................... P1/F1 5.20% 5/02/96 30,000 29,731,333
Daimler-Benz North America
Corp. ......................... A1/P1 5.57% 3/15/96 25,000 24,945,847
Daimler-Benz North America
Corp. ......................... A1/P1 5.57% 3/22/96 42,000 41,863,535
Daimler-Benz North America
Corp. ......................... A1/P1 5.50% 3/29/96 25,000 24,893,056
Daimler-Benz North America
Corp. ......................... A1/P1 5.14% 4/24/96 42,000 41,676,180
General Motors Acceptance
Corp. ......................... P1/D1 5.40% 4/04/96 25,000 24,872,500
General Motors Acceptance
Corp. ......................... P1/D1 5.37% 4/04/96 32,800 32,633,649
General Motors Acceptance
Corp. ......................... P1/D1 5.43% 4/12/96 50,000 49,683,250
General Motors Acceptance
Corp. ......................... P1/D1 5.48% 4/12/96 25,000 24,840,167
General Motors Acceptance
Corp. ......................... P1/D1 5.05% 6/03/96 25,000 24,670,347
------------
425,195,502
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
58
<PAGE> 61
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY PRINCIPAL AMORTIZED
N.R.S.R.O. MATURITY AMOUNT COST
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ------------ ------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BANKING -- 11.4%
ABN-AMRO North American Finance
Inc. .......................... A1+/P1 5.25% 5/20/96 $ 50,000 $ 49,416,667
ABN-AMRO North American Finance
Inc. .......................... A1+/P1 5.10% 10/04/96 50,000 48,462,917
Abbey National of North America
Corp. ......................... A1+/P1 5.45% 5/28/96 25,000 24,666,945
Abbey National of North America
Corp. ......................... A1+/P1 4.96% 6/17/96 25,000 24,628,000
Abbey National of North America
Corp. ......................... A1+/P1 5.18% 6/19/96 50,000 49,208,611
Abbey National of North America
Corp. ......................... A1+/P1 5.04% 8/09/96 50,000 48,873,000
ANZ -- Delaware Inc. ............ A1/P1 5.15% 6/21/96 25,000 24,599,445
Bankers Trust, New York
Corp. ......................... A1/P1 5.64% 3/07/96 50,000 49,953,000
Bankers Trust, New York
Corp. ......................... A1/P1 5.53% 5/07/96 30,000 29,691,242
Bankers Trust, New York
Corp. ......................... A1/P1 5.50% 5/28/96 50,000 49,327,778
Canadian Imperial Holdings,
Inc. .......................... A1+/P1 5.27% 4/26/96 25,000 24,795,056
Cregem North America, Inc. ...... A1+/P1 4.88% 8/13/96 50,000 48,881,667
Generale Bank, Inc. ............. A1/P1 5.63% 3/15/96 50,000 49,890,528
Royal Bank of Canada............. A1+/P1 5.38% 6/07/96 25,000 24,634,201
Societe Generale N.A. ........... A1+/P1 4.91% 7/10/96 25,000 24,553,326
Svenska Handlesbanken, Inc. ..... A1/P1 5.25% 4/26/96 23,500 23,308,083
Westpac Capital Corp. ........... A1/P1 5.29% 6/25/96 25,000 24,573,861
------------
619,464,327
------------
BROKERAGE -- 0.9%
Merrill Lynch & Co., Inc. ....... A1+/P1 5.60% 3/29/96 50,000 49,782,222
------------
CHEMICALS -- DIVERSIFIED -- 0.5%
Bayer Corp.*(a) ................. A1+/P1 5.47% 3/19/96 25,000 24,931,625
------------
CONGLOMERATES -- 3.0%
B.A.T. Capital Corp. ............ A1/P1 5.16% 4/16/96 25,000 24,835,326
General Electric Capital
Corp. ......................... A1+/P1 5.58% 3/29/96 25,000 24,891,500
General Electric Capital
Corp. ......................... A1+/P1 5.48% 5/03/96 50,000 49,520,500
General Electric Capital
Corp. ......................... A1+/P1 5.46% 5/10/96 25,000 24,734,583
Pacific Dunlop Holdings,
Inc.*(a) ...................... A1/P1 5.61% 3/29/96 20,152 20,064,070
Pacific Dunlop Holdings,
Inc.*(a) ...................... A1/P1 5.45% 4/30/96 19,000 18,827,417
------------
162,873,396
------------
CONSUMER ELECTRONICS -- 1.2%
Hitachi America, Ltd. ........... A1+/P1 5.57% 3/18/96 20,000 19,947,394
Hitachi America, Ltd. ........... A1+/P1 5.62% 4/09/96 20,000 19,878,233
Sharp Electronics Corp. ......... A1/P1 5.64% 3/15/96 25,000 24,945,167
------------
64,770,794
------------
CONSUMER GOODS -- 1.7%
Colgate-Palmolive Co.*(a)........ A1/P1 5.54% 3/19/96 20,000 19,944,600
Colgate-Palmolive Co.*(a)........ A1/P1 5.36% 6/14/96 25,000 24,609,167
Colgate-Palmolive Co.*(a)........ A1/P1 4.90% 9/12/96 50,000 48,672,917
------------
93,226,684
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
59
<PAGE> 62
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY PRINCIPAL AMORTIZED
N.R.S.R.O. MATURITY AMOUNT COST
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ------------ -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
FINANCE COMPANIES -- 4.1%
American Express Credit Corp..... A1/P1 5.37% 6/04/96 $ 25,000 $ 24,645,729
Associates Corp of North
America........................ A1+/P1 5.58% 5/10/96 50,000 49,457,500
Associates Corp of North
America........................ A1+/P1 5.03% 6/11/96 25,000 24,643,708
CIT Group Holdings, Inc.......... A1/P1 5.20% 4/12/96 25,000 24,848,333
CIT Group Holdings, Inc.......... A1/P1 5.16% 4/19/96 25,000 24,824,417
Dean Witter Discover & Co........ A1/P1 5.20% 5/03/96 50,000 49,545,000
Household Finance Corp........... A1/P1 5.04% 5/17/96 25,000 24,730,500
------------
222,695,187
------------
FOOD PRODUCTS -- 0.7%
Heinz (H.J.) Co.................. A1/P1 5.36% 6/18/96 40,000 39,350,844
------------
HOUSEHOLD FURNITURE & APPLIANCES -- 1.3%
Whirlpool Financial Corp......... A1/D1 5.69% 3/01/96 25,000 25,000,000
Whirlpool Financial Corp......... A1/D1 5.46% 4/02/96 45,000 44,781,600
------------
69,781,600
------------
INSURANCE -- 1.3%
AIG Funding, Inc................. A1+/P1 5.35% 7/31/96 20,710 20,242,184
Marsh & McLennan Companies,
Inc.*(a)....................... A1+/P1 5.33% 7/19/96 25,000 24,481,806
Marsh & McLennan Companies,
Inc.*(a)....................... A1+/P1 5.25% 8/16/96 25,000 24,387,500
------------
69,111,490
------------
LEASING -- 1.8%
Hertz Corp....................... A1/P1 5.47% 3/22/96 25,000 24,920,229
Hertz Corp....................... A1/P1 5.20% 4/05/96 50,000 49,747,222
Hertz Corp....................... A1/P1 4.97% 6/20/96 25,000 24,616,896
------------
99,284,347
------------
PHARMACEUTICALS -- 0.9%
American Home Food Products(b)... P1/D1 5.20% 4/22/96 22,893 22,721,048
A.H. Robins Co., Inc.(b)......... P1/D1 5.20% 4/19/96 28,500 28,298,283
------------
51,019,331
------------
TELECOMMUNICATIONS -- 2.5%
Alcatel Capital Corp............. A1+/P1 5.62% 3/01/96 22,000 22,000,000
AT&T Corp........................ A1+/P1 5.20% 3/29/96 25,000 24,898,889
AT&T Corp........................ A1+/P1 5.55% 4/11/96 35,000 34,778,771
AT&T Corp........................ A1+/P1 5.46% 5/10/96 25,000 24,734,583
AT&T Corp........................ A1+/P1 5.10% 7/31/96 30,000 29,354,000
------------
135,766,243
------------
UTILITIES -- 1.4%
National Rural Utility
Cooperative Finance Corp. ..... A1+/P1 5.60% 3/18/96 25,000 24,933,889
Southern California
Gas Co.*(a) ................... A1+/P1 5.57% 5/03/96 25,000 24,756,313
Southern California
Gas Co.*(a) ................... A1+/P1 4.91% 8/29/96 29,000 28,284,095
------------
77,974,297
------------
2,225,167,222
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
60
<PAGE> 63
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY PRINCIPAL AMORTIZED
N.R.S.R.O. MATURITY AMOUNT COST
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ------------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FOREIGN -- 5.6%
AGRICULTURE -- 0.9%
Canadian Wheat Board............. A1+/P1 4.95% 6/14/96 $ 30,000 $ 29,566,875
Canadian Wheat Board............. A1+/P1 4.90% 7/08/96 18,000 17,683,950
------------
47,250,825
------------
AUTOMOBILES -- 1.8%
Renault Credit Internationale
S.A. Banque.................... P1/F1 5.75% 3/01/96 16,000 16,000,000
Renault Credit Internationale
S.A. Banque.................... P1/F1 5.13% 5/02/96 22,200 22,003,863
Renault Credit Internationale
S.A. Banque.................... P1/F1 5.11% 5/13/96 34,400 34,043,549
Renault Credit Internationale
S.A. Banque.................... P1/F1 5.15% 7/31/96 24,600 24,065,087
------------
96,112,499
------------
BANKING -- 0.7%
Barclays Bank of Canada.......... A1+/P1 5.62% 3/01/96 15,000 15,000,000
Bradford & Bingley Building
Society........................ A1/P1 4.94% 8/08/96 25,000 24,451,111
------------
39,451,111
------------
FINANCE COMPANIES -- 0.6%
Hanson Finance (U.K.) PLC........ A1/P1 5.50% 3/27/96 35,000 34,860,972
------------
PHARMACEUTICALS -- 0.7%
Glaxo Wellcome PLC............... A1+/P1 5.15% 4/22/96 38,000 37,717,322
------------
UTILITIES -- 0.9%
Ontario Hydro.................... A1+/P1 5.04% 5/17/96 50,000 49,461,000
------------
304,853,729
------------
Total Commercial Paper
(amortized cost $2,651,921,602).. 2,651,921,602
------------
CORPORATE OBLIGATIONS -- 12.0%
BROKERAGE -- 5.5%
Bear Stearns Cos., Inc., Monthly
Variable Rate, (final maturity
date 2/3/97)+.................. A1/P1 5.46% 3/01/96 100,000 100,000,000
CS First Boston, Inc., Quarterly
Variable Rate, (final maturity
3/3/97)*+(b)................... A1/P1 5.29% 3/03/96 25,000 25,000,000
CS First Boston, Inc., Quarterly
Variable Rate, (final maturity
3/25/97)*+(b).................. A1/P1 6.35% 3/25/96 25,000 25,000,000
Merrill Lynch & Co., Inc.,
Monthly Variable Rate, (final
maturity date 11/20/96)+....... A1/P1 5.31% 3/20/96 50,000 50,000,000
Merrill Lynch & Co., Inc.,
Quarterly Variable Rate, (final
maturity date 2/10/97)+........ A1+/P1 6.33% 5/10/96 50,000 50,000,000
Merrill Lynch & Co., Inc.,
Quarterly Variable Rate, (final
maturity date 11/12/96)+....... A1+/P1 5.28% 5/12/96 50,000 49,996,609
------------
299,996,609
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
61
<PAGE> 64
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY PRINCIPAL AMORTIZED
N.R.S.R.O. MATURITY AMOUNT COST
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ------------ ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
FINANCE COMPANIES -- 5.7%
American Express Credit Corp. ... A1/P1 7.88% 12/01/96 $ 10,000 $ 10,159,813
Associates Corporation of North
America........................ A1+/P1 4.63% 11/30/96 19,250 19,101,397
Ciesco L.P., Monthly Variable
Rate, (final maturity date
8/14/96)+(b)................... A1+/P1 5.27% 3/14/96 75,000 74,993,197
CIT Group Holdings, Inc. ........ A1/P1 7.63% 12/05/96 48,030 48,726,394
Corporate Asset Funding Co.,
Monthly Variable Rate, (final
maturity date 12/2/96)+(b)..... A1+/P1 5.28% 3/29/96 25,000 24,994,375
Dean Witter Discover & Co.,
Quarterly Variable Rate, (final
maturity date 11/15/96)+....... A1/P1 5.45% 5/15/96 50,000 50,079,808
Ford Motor Credit Corp. ......... A1/P1 5.38% 12/02/96 32,000 31,996,136
Household Finance Corp. ......... A1/P1 9.63% 3/11/96 1,250 1,250,777
Household Finance Corp., Monthly
Variable Rate, (final maturity
date 8/27/96)+................. A1/P1 5.30% 3/25/96 50,000 50,000,000
------------
311,301,897
------------
LEASING -- 0.6%
USL Capital Corp., Quarterly
Variable Rate, (final maturity
date 10/31/96)+................ A1/P1 5.38% 4/30/96 30,000 30,024,236
------------
TELECOMMUNICATIONS -- 0.2%
AT&T Capital Corp................ A1/P1 6.19% 4/30/96 10,000 10,005,063
------------
Total Corporate Obligations
(amortized cost $651,327,805).... 651,327,805
------------
CERTIFICATES OF DEPOSIT -- 3.1%
U.S. BRANCHES OF FOREIGN BANKS -- 3.1%
Bank of Nova Scotia Portland..... A1+/P1 5.75% 3/14/96 25,000 24,999,780
Banque National de Paris, New
York........................... A1/P1 5.53% 6/14/96 25,000 25,000,709
Commerzbank AG, New York......... A1+/P1 5.07% 6/10/96 25,000 25,001,330
Royal Bank of Canada,
New York....................... A1+/P1 5.13% 2/21/96 25,000 24,994,110
Royal Bank of Canada,
New York....................... A1+/P1 5.53% 6/27/96 25,000 25,000,795
Societe Generale New York........ A1+/P1 5.88% 3/07/96 40,000 40,000,582
------------
Total Certificates of Deposit
(amortized cost $164,997,306).... 164,997,306
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
62
<PAGE> 65
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY PRINCIPAL AMORTIZED
N.R.S.R.O. MATURITY AMOUNT COST
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ------------ ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
FEDERAL AGENCY NOTES -- 0.9%
Federal Farm Credit Bank Note,
Daily Variable Rate, (final
maturity date 5/6/96)+......... A1+/P1! 5.55% 3/01/96 $ 50,000 $ 49,995,484
Federal Home Loan Bank, Quarterly
Variable Rate, (final maturity
date 3/8/96)+.................. A1+/P1! 5.51% 3/08/96 500 499,972
------------
Total Federal Agency Notes
(amortized cost $50,495,456)..... 50,495,456
------------
U.S. TREASURY OBLIGATIONS -- 2.3%
U.S. Treasury Bill............... A1+/P1! 5.01%(t) 4/18/96 100,000 99,332,667
U.S. Treasury Note............... A1+/P1! 6.88% 10/31/96 25,000 25,284,614
------------
Total U.S. Treasury Obligations
(amortized cost $124,617,281).... 124,617,281
------------
MASTER NOTES -- 7.8%
Goldman Sachs Group L.P., (final
maturity date 7/26/96)......... A1+/P1 5.59% 3/01/96 220,000 220,000,000
Morgan Stanley Group, Inc.,
(final maturity date 4/8/96)... A1+/P1 5.54% 3/01/96 200,000 200,000,000
------------
Total Master Notes
(amortized cost $420,000,000).... 420,000,000
------------
BANK NOTES -- 7.6%
American Express Centurion Bank,
Monthly Variable Rate, (final
maturity date
6/20/96)+...................... A1/P1 5.30% 3/20/96 50,000 50,000,000
CoreStates Capital Corp., Monthly
Variable Rate, (final maturity
date 6/17/96)+................. A1/P1 5.28% 3/21/96 50,000 50,000,000
FCC National Bank, Wilmington
Delaware....................... A1/P1 5.70% 3/04/96 25,000 25,000,000
FCC National Bank, Wilmington
Delaware....................... A1/P1 5.80% 8/29/96 25,000 25,081,849
First Union National Bank of
North Carolina, Charlotte Daily
Variable Rate, (final maturity
date 5/15/96)+................. A1/P1 6.24% 3/01/96 50,000 49,994,836
Huntington National Bank,
Columbus....................... A1/P1 5.28% 1/10/97 20,000 20,000,000
Huntington National Bank,
Columbus, Daily Variable Rate,
(final maturity date
12/2/96)+...................... A1/P1 5.28% 3/01/96 76,000 75,954,538
NationsBank Corp................. A1/P1 4.75% 8/15/96 30,000 29,891,038
PNC Bank N.A., Pittsburgh,
Pennsylvania Daily Variable
Rate, (final maturity
10/4/96)+...................... A1/P1 6.23% 3/01/96 60,000 59,964,405
</TABLE>
- ---------------
See Notes to Financial Statements.
63
<PAGE> 66
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY PRINCIPAL AMORTIZED
N.R.S.R.O. MATURITY AMOUNT COST
DESCRIPTION (UNAUDITED) RATE DATE (000) (NOTE 2)
- ---------------------------------- ------------ ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- (CONTINUED)
Wachovia Bank of North Carolina,
Monthly Variable Rate, (final
maturity date
5/2/96)+....................... A1+/P1 5.39% 3/04/96 $ 25,000 $ 25,000,376
-------------
Total Bank Notes
(amortized cost $410,887,042).... 410,887,042
-------------
Total Investments
(amortized cost $4,474,246,492).. 4,474,246,492
-------------
REPURCHASE AGREEMENTS -- 17.3%
Repurchase agreement with Dean
Witter Reynolds, Inc., dated
2/29/96, with a maturity value
of $105,015,838.
(See Footnote A)............... 5.43% 3/01/96 105,000 105,000,000
Repurchase agreement with First
Chicago Capital Markets, Inc.,
dated 2/29/96, with a maturity
value of $105,015,896.
(See Footnote B)............... 5.45% 3/01/96 105,000 105,000,000
Repurchase agreement with First
Chicago Capital Markets, Inc.,
dated 2/29/96, with a maturity
value of $15,099,273.
(See Footnote C)............... 5.42% 3/01/96 15,097 15,097,000
Repurchase agreement with First
National Bank of Chicago, dated
2/29/96, with a maturity value
of $50,007,528.
(See Footnote D)............... 5.42% 3/01/96 50,000 50,000,000
Repurchase agreement with Fuji
Securities, dated 2/29/96, with
a maturity value of
$105,015,925.
(See Footnote E)............... 5.46% 3/01/96 105,000 105,000,000
Repurchase agreement with HSBC
Securities, Inc., dated
2/29/96, with a maturity value
of $105,015,896.
(See Footnote F)............... 5.45% 3/01/96 105,000 105,000,000
Repurchase agreement with Morgan
Stanley Group, Inc., dated
2/29/96, with a maturity value
of $105,015,838.
(See Footnote G)............... 5.43% 3/01/96 105,000 105,000,000
Repurchase agreement with Morgan
Stanley Group, Inc., dated
2/29/96, with a maturity value
of $100,017,361.
(See Footnote G)............... 6.25% 3/01/96 100,000 100,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
64
<PAGE> 67
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATE DATE (000) (NOTE 2)
- ---------------------------------- ---- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS -- (CONTINUED)
Repurchase agreement with Nomura
Securities International, Inc.,
dated 2/29/96, with a maturity
value of $105,015,808.
(See Footnote H)............... 5.42% 3/01/96 $105,000 $ 105,000,000
Repurchase agreement with Nomura
Securities International, Inc.,
dated 2/29/96, with a maturity
value of $36,059,009.
(See Footnote H)............... 6.00% 3/01/96 36,053 36,053,000
Repurchase agreement with
Prudential Securities, Inc.,
dated 2/29/96, with a maturity
value of $105,015,925.
(See Footnote I)............... 5.46% 3/01/96 105,000 105,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST $936,150,000).... 936,150,000
------------
TOTAL INVESTMENTS
(AMORTIZED COST
$5,410,396,492)(C) -- 100.0%... 5,410,396,492
Other assets in excess of
liabilities -- 0.0%.............. 673,481
------------
NET ASSETS -- 100.0%.............. $5,411,069,973
==============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $5,411,069,973.
(a) Private placement security.
(b) 144a security which is restricted as to resale to institutional investors.
(c) Cost for federal income tax and financial reporting purposes are
substantially the same.
<TABLE>
<S> <C> <C>
N.R.S.R.O. -- Nationally Recognized Statistical Rating Organization. Rating agencies that are
included within the N.R.S.R.O. category are: S&P, Moody's, Fitch Investors
Services, Duff & Phelps and IBCA.
A1 -- Highest rating assigned by S&P and IBCA.
P1 -- Highest rating assigned by Moody's.
F1 -- Highest rating assigned by Fitch Investors.
D1 -- Highest rating assigned by Duff.
</TABLE>
! Implied short-term rating
* Illiquid security.
+ Variable rate security. Maturity date reflects the later of the next interest
rate change date or the next put date.
t Effective yield at date of issuance.
(footnotes continue on next page)
See Notes to Financial Statements.
65
<PAGE> 68
(footnotes continued from previous page)
<TABLE>
<S> <C> <C>
Footnote A -- Collateralized by $212,512,668 various U.S. Government securities, with various
coupon rates ranging from 5.50% to 12.00% and maturities ranging from 5/1/97
through 2/1/26; with an aggregate market value of $107,100,708.
Footnote B -- Collateralized by $106,678,000 various U.S. Treasury Notes, with various coupon
rates ranging from 5.00% to 8.50% and maturities ranging from 12/31/96 through
2/28/98; with an aggregate market value of $107,104,447.
Footnote C -- Collateralized by $15,560,000 various U.S. Government securities, with various
coupon rates ranging from 0.00% to 8.25% and maturities ranging from 6/3/96
through 12/18/00; with an aggregate market value of $15,400,166.
Footnote D -- Collateralized by $53,963,000 various U.S. Treasury securities, with various
coupon rates ranging from 0.00% to 7.88% and maturities ranging from 7/18/96
through 2/15/25; with an aggregate market value of $51,001,264.
Footnote E -- Collateralized by $113,447,000 various U.S. Government securities, with various
coupon rates ranging from 0.00% to 9.25%, and maturities ranging from 5/6/96
through 2/15/16; with an aggregate market value of $107,101,479.
Footnote F -- Collateralized by $106,680,000 various U.S. Government securities, with various
coupon rates ranging from 0.00% to 9.55%, and maturities ranging from 3/22/96
through 8/1/05; with an aggregate market value of $107,104,005.
Footnote G -- These two repurchase agreements are collateralized by $410,268,614 various U.S.
Government securities, with various coupon rates ranging from 6.00% to 13.00% and
maturities ranging from 2/1/98 through 6/15/25, with an aggregate market value of
$210,792,377.
Footnote H -- These two repurchase agreements are collateralized by $144,473,000 various U.S.
Government securities, with various coupon rates ranging from 0.00% to 11.13% and
maturities ranging from 3/1/96 through 12/10/15; with an aggregate market value
of $143,896,509.
Footnote I -- Collateralized by $108,451,000 various U.S. Government securities, with various
coupon rates ranging from 0.00% to 9.4%, and maturities ranging from 3/4/96
through 11/1/25; with an aggregate market value of $107,100,967.
</TABLE>
See Notes to Financial Statements.
66
<PAGE> 69
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (amortized cost
$4,474,246,492).................................................. $4,474,246,492
Repurchase agreements (amortized cost $936,150,000)................ 936,150,000
Cash............................................................... 70,856
Interest receivable................................................ 12,395,782
Prepaid expenses................................................... 205,490
--------------
Total assets......................................................... 5,423,068,620
--------------
LIABILITIES:
Administration fees payable........................................ 427,992
Advisory fees payable.............................................. 405,782
Special management fees payable (Pacific Horizon Shares)........... 526,842
Service organization fees payable (Horizon Service Shares)......... 309,250
Dividends payable.................................................. 9,564,365
Other accrued expenses............................................. 764,416
--------------
Total liabilities.................................................... 11,998,647
--------------
NET ASSETS........................................................... $5,411,069,973
==============
Net Assets
Pacific Horizon Shares............................................. 2,199,505,123
Horizon Shares..................................................... 1,650,564,217
Horizon Service Shares............................................. 1,561,000,633
--------------
5,411,069,973
==============
Shares Outstanding ($0.001 par value)
Pacific Horizon Shares............................................. 2,200,450,932
Horizon Shares..................................................... 1,651,273,975
Horizon Service Shares............................................. 1,561,671,878
--------------
Total Shares Outstanding............................................. 5,413,396,785
==============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE....... $1.00
=====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par..................................... $ 5,413,397
Additional paid-in capital......................................... 5,407,767,380
Accumulated net realized losses.................................... (3,825,365)
Accumulated undistributed net investment income.................... 1,714,561
--------------
NET ASSETS, FEBRUARY 29, 1996........................................ $5,411,069,973
==============
</TABLE>
- ---------------
See Notes to Financial Statements.
67
<PAGE> 70
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the year ended February 29, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................ $240,851,813
------------
EXPENSES:
Advisory fees....................................................... 3,964,899
Administration fees................................................. 4,062,578
Special management fees (Pacific Horizon Shares).................... 5,244,694
Service organization fees (Horizon Service Shares).................. 3,119,024
Custodian fees and expenses......................................... 580,076
Transfer agent fees and expenses.................................... 383,865
Insurance expense................................................... 126,680
Membership fees..................................................... 65,312
Directors' fees..................................................... 158,820
Audit fees.......................................................... 42,321
Legal fees.......................................................... 52,693
Reports to shareholders............................................. 36,118
Registration fees................................................... 117,234
Other expenses...................................................... 35,956
------------
17,990,270
Less: Fee waivers and expenses reimbursements......................... (235,000)
------------
17,755,270
------------
Net Investment Income................................................. 223,096,543
REALIZED GAIN ON INVESTMENTS:
Net realized gains on securities transactions....................... 277,551
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $223,374,094
============
</TABLE>
- ---------------
See Notes to Financial Statements.
68
<PAGE> 71
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................... $ 223,096,543 $ 138,770,401
Net realized gains (losses) on securities
transactions.......................................... 277,551 (70,528,584)
---------------- -----------------
Net increase in net assets resulting from operations.... 223,374,094 68,241,817
---------------- -----------------
Dividends to Shareholders from Net Investment Income:
Pacific Horizon Shares.................................. (87,771,565) (45,136,378)
Horizon Shares.......................................... (66,852,421) (56,633,687)
Horizon Service Shares.................................. (67,741,940) (36,337,275)
---------------- -----------------
Total dividends to shareholders from net investment
income.................................................. (222,365,926) (138,107,340)
---------------- -----------------
Portfolio Share Transactions:
(at $1.00 per share) (Notes 1 & 6)
Net proceeds from shares subscribed..................... 31,908,025,354 22,779,590,840
Net asset value of shares issued to shareholders in
reinvestment of dividends............................. 113,292,127 44,544,475
Cost of shares redeemed................................. (29,226,683,074) (26,110,723,254)
---------------- -----------------
Net increase (decrease) in net assets from Portfolio
share transactions...................................... 2,794,634,407 (3,286,587,939)
---------------- -----------------
Increase due to capital contribution from investment
adviser (Note 3)........................................ -- 77,411,877
---------------- -----------------
Total Increase (Decrease)................................ 2,795,642,575 (3,279,041,585)
NET ASSETS:
Beginning of year....................................... 2,615,427,398 5,894,468,983
---------------- -----------------
End of year (including undistributed net investment
income of $1,714,561 and $983,944, respectively)...... $ 5,411,069,973 $ 2,615,427,398
================ =================
</TABLE>
- ---------------
See Notes to Financial Statements.
69
<PAGE> 72
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Pacific Horizon Funds, Inc. (the "Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At February 29, 1996, the Fund
operated as a series company comprising fifteen portfolios. The accompanying
financial statements and notes are those of the Pacific Horizon Prime Fund (the
"Prime Fund") only. The investment objective of the Prime Fund is to seek high
current income and stability of principal by investing substantially all of its
assets in a diversified portfolio of U.S. dollar-denominated money market
instruments and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
The Prime Fund issues three classes of shares (Pacific Horizon Shares,
Horizon Shares and Horizon Services Shares). Pacific Horizon Shares, Horizon
Shares and Horizon Service Shares are substantially the same except that Pacific
Horizon Shares bear the fees payable under the Fund's Special Management
Services Agreement at an annual rate of 0.32% of the average daily net asset
value of the outstanding Pacific Horizon Shares while Horizon Service Shares
bear the fees payable, under the Shareholder Services Plan, to institutions
("Service Organizations") that provide support services to their clients who
beneficially own such shares. Such fees are payable at an annual rate of 0.25%
of the average daily net asset value of the outstanding Horizon Service Shares.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. Concord Holding Corporation ("Concord") serves as the Fund's
administrator and Concord Financial Group, Inc. (the "Distributor"), a wholly
owned subsidiary of Concord, serves as the distributor of the Fund's shares.
Effective March 29, 1995, Concord became a wholly owned subsidiary of The BISYS
Group, Inc. ("BISYS").
On August 28, 1995, the 231 Prime Fund -- Institutional Shares (the "231
Prime Institutional Shares") and the 231 Prime Fund -- Service Shares (the "231
Prime Service Shares") were reorganized with the Prime Fund, in a tax-free
reorganization. Pursuant to the terms of the reorganization, the 231 Prime
Institutional Shares and 231 Prime Service Shares transferred all of their
assets and liabilities to the Prime Fund in exchange for Horizon Shares and
Horizon Service Shares, respectively, of the Prime Fund with a value equivalent
to the net value of assets and liabilities so transferred. In connection with
the reorganization, the 231 Prime Fund Institutional Shares shareholders
received 971,168,989 Horizon Shares of the Prime Fund and the 231 Prime Fund
Service Shares shareholders received 140,144,817 Horizon Service Shares of the
Prime Fund. The aggregate net assets of the 231 Prime Fund and the Prime Fund
immediately prior to the reorganization were $1,110,157,724 and
70
<PAGE> 73
$3,755,249,822, respectively. Immediately following the reorganization, the net
assets of the Prime Fund was $4,846,823,637.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Prime Fund in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
A) PORTFOLIO VALUATIONS:
Portfolio securities are valued at amortized cost, which approximates market
value. The amortized cost method involves valuing a security at its cost on the
date of purchase and thereafter assuming a constant amortization to maturity of
the difference between the principal amount due at maturity and cost. In
addition, the Prime Fund may not (a) purchase any instrument with a remaining
maturity greater than thirteen months unless such instrument is subject to a
demand feature, or (b) maintain a dollar-weighted-average portfolio maturity
which exceeds 90 days.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income, including accretion of discount and amortization of
premium, is accrued daily.
C) REPURCHASE AGREEMENTS:
The Fund's custodian and other banks acting in a subcustodian capacity take
possession of the collateral pledged for investments in repurchase agreements.
The underlying collateral is valued daily on a mark-to-market basis to determine
that the value, including accrued interest, is not less than 102% of the
repurchase price (including accrued interest), provided that notwithstanding
such requirement, the adviser shall require that the value of the collateral,
after transaction costs (including loss of interest) reasonably expected to be
incurred on a default, shall be equal to or greater than the resale price
(including interest) provided in the agreement. In the event of the seller's
default of the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings.
D) DIVIDENDS AND DISTRIBUTIONS:
Dividends are declared daily to shareholders of record at the close of
business on the day of declaration and paid monthly. Distributions of net
realized gains, if any, will be paid at least annually. However, to the extent
that net realized gains of the Prime Fund can be offset by
71
<PAGE> 74
capital loss carryovers from that Fund, such gains will not be distributed.
Dividends and distributions are recorded by the Prime Fund on the ex-dividend
date.
The amount of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
E) FEDERAL INCOME TAXES:
For federal income tax purposes, each Portfolio is treated as a separate
entity for the purpose of determining the Portfolio's qualification as a
regulated investment company under the Internal Revenue Code (the "Code"). It is
the policy of the Fund that each Portfolio comply with the requirements of the
Code applicable to regulated investment companies, including the requirement
that each Portfolio distribute substantially all of its taxable income to
shareholders. Therefore, no federal income tax provision is required.
At February 29, 1996, the Prime Fund had the following capital loss
carryovers:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRATION DATE
- ------------ ----------------
<S> <C>
$ 917,847 2002
2,725,176 2003
----------
$3,643,023
==========
</TABLE>
To the extent these capital loss carryovers are used to offset future net
realized gains on securities transactions, the gains so offset will not be
distributed to shareholders, to the extent provided by the regulations under the
Code. Additionally, during the year ended February 29, 1996, the Prime Fund
utilized $277,551 of capital loss carryovers.
F) OTHER:
The Fund accounts separately for the assets, liabilities and operations of
the Prime Fund. Expenses directly attributable to the Prime Fund are charged to
the Prime Fund, while Fund expenses which are attributable to more than one
portfolio of the Fund are allocated among the respective portfolios. The
investment income and the expenses (other than expenses incurred under the
Special Management Services Agreements and Shareholder Services Plan) of the
Prime Fund are allocated to the separate classes of shares based upon their
relative net asset value.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Prime Fund has an Investment Advisory Agreement with Bank of America and
a Basic Administrative Services Agreement with Concord. Bank of America is
entitled to a fee from the Prime Fund, which is accrued daily and payable
monthly, at an annual rate of 0.10% of the Prime Fund's first $3 billion of net
assets, plus 0.09% of the next $2 billion of net assets,
72
<PAGE> 75
plus 0.08% of net assets in excess of $5 billion. Concord is entitled to a fee
from the Prime Fund, which is accrued daily and payable monthly, at an annual
rate of 0.10% of the first $7 billion of net assets, plus 0.09% of the next $3
billion of net assets, plus 0.08% of net assets in excess of $10 billion. For
the year ended February 29, 1996, Concord agreed to reimburse other operating
expenses of the Prime Fund in the amount of $235,000.
The agreements provide that if, in any fiscal year, the aggregate expenses
of the Prime Fund (generally excluding interest, taxes, brokerage commissions
and extraordinary expenses) exceed the most restrictive expense limitation of
any state having jurisdiction over that Fund, then Bank of America and Concord
will reimburse the Prime Fund for any such excess expenses. As of February 29,
1996, the most restrictive expense limitation is believed to limit expenses to
2.5% of the first $30 million of average daily net assets, plus 2.0% of the next
$70 million of such assets plus 1.5% of such assets in excess of $100 million.
The agreements provide that such reimbursements will be estimated on a monthly
basis. No reimbursement was required for the year ended February 29, 1996 for
the Prime Fund.
The Prime Fund has entered into a Special Management Service Agreement
("Services Agreement") pursuant to which it agrees to pay Bank of America and
Concord a fee for various services relating to Pacific Horizon Shares. The
special management services fee is accrued daily at an annual rate of 0.32% of
the average daily net asset value of the outstanding Pacific Horizon Shares of
the Prime Fund, and this is borne solely by the Pacific Horizon Shares. For the
year ended February 29, 1996, the Prime Fund was advised that Concord, Bank of
America and their affiliates earned the following amounts pursuant to the
Services Agreement:
<TABLE>
<CAPTION>
AFFILIATES OF
BANK OF AFFILIATES BANK OF
AMERICA CONCORD OF CONCORD AMERICA
- ---------- ------- ---------- -------------
<S> <C> <C> <C>
$4,193,897 $68,810 $633,935 $ 348,052
</TABLE>
The Prime Fund has also adopted a Shareholder Services Plan (the "Horizon
Service Plan") pursuant to which Service Organizations agree to provide certain
services to their clients who are beneficial owners of Horizon Service Shares in
return for payment by the Prime Fund of a fee at an annual rate of 0.25% of the
average daily net asset value of the Horizon Service Shares outstanding form
time to time. These payments are borne solely by the Horizon Service Shares.
Service Organizations may include the Distributor, Bank of America and their
affiliates. For the year ended February 29, 1996, the Prime Fund was advised
that affiliates of Bank of America earned $3,065,147 pursuant to the Horizon
Service Plan.
During the period from May 6, 1994 through July 12, 1994, Bank of America
voluntarily contributed capital to the Prime Fund in the aggregate amount of
approximately $77.4 million. Bank of America received no shares of common stock
or other consideration in exchange for these contributions which increased net
asset value. For tax purposes, this capital contribution was applied against the
realized losses for the year ended February 28, 1995.
73
<PAGE> 76
Accordingly, this amount was reclassified from additional paid-in capital
against accumulated net realized losses in the Statement of Assets and
Liabilities.
For the year ended February 29, 1996, the Prime Fund incurred legal charges
totaling $52,693 which were earned by a law firm, a partner of which serves as
Secretary to the Fund. Certain officers of the Fund are "affiliated persons" (as
defined in the Act) of BISYS.
Concord Financial Services, Inc., a wholly owned subsidiary of Concord, acts
as transfer agent for the Horizon class of shares for the Prime Fund. For the
year ended February 29, 1996 Concord Financial Services Inc. earned $29,021 from
the Prime Fund.
Effective December 11, 1995, BISYS Fund Services, Inc., also a wholly owned
subsidiary of BISYS, serves the Fund as transfer agent and dividend disbursing
agent for the Pacific Horizon Shares and Horizon Service Shares of the Prime
Fund. In this capacity, BISYS Fund Services, Inc. earned $100,800 for the period
from December 11, 1995 through February 29, 1996. Prior to December 11, 1995, an
unrelated party provided these services.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Fund is entitled to an annual retainer of $25,000, plus
$1,000 for each day the director participates in all or part of a Board or
Committee meeting and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Fund's
President is entitled to an annual salary of $20,000 for services as President.
The former President and Chairman of the Fund receives an additional $40,000 per
year through February 28, 1997 in consideration for his years of service. Total
charges for directors' fees and expenses incurred for the year ended February
29, 1996 were $158,820 the Prime Fund.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. In addition, the amount
payable each year to a Director who dies or resigns shall be increased by $1,000
for each year of service that the Director served as Chairman of the Board. Each
Director may receive any benefits payable under the Retirement Plan, at his or
her election, either in one lump sum payment or ten annual installments. A
Director's years of service for the purpose of calculating the payments
described above shall be based upon service as a Director or Chairman after
February 28, 1994. Aggregate costs to the Prime Fund pursuant to the Retirement
Plan amounted to $24,701 for the year ended February 29, 1996.
74
<PAGE> 77
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Prime Fund invests substantially all of its assets in a diversified
portfolio of high quality U.S. dollar-denominated money market instruments as
disclosed in the portfolio of investments by security type. The issuers'
abilities to meet their obligations may be affected by domestic and foreign
economic, regional and political developments.
The Prime Fund had the following concentrations by industry sector at
February 29, 1996 (as a percentage of total investments):
<TABLE>
<CAPTION>
<S> <C>
Banking.................................................................... 22.8%
Repurchase Agreements...................................................... 17.3
Brokerage Services......................................................... 14.2
Finance Companies.......................................................... 11.5
Automobiles................................................................ 10.2
Conglomerates.............................................................. 5.0
U.S. Government Securities................................................. 3.2
Telecommunications......................................................... 2.7
Leasing.................................................................... 2.4
Utilities.................................................................. 2.4
Pharmaceuticals............................................................ 1.6
Agriculture................................................................ 1.3
Household Furniture and Appliance.......................................... 1.3
Insurance.................................................................. 1.3
Electronics................................................................ 1.2
Food Products.............................................................. 0.7
Chemicals - Diversified.................................................... 0.5
Consumer Non-Durables...................................................... 0.4
-----
100.0%
=====
</TABLE>
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
At February 29, 1996, there were 200 billion shares of the Fund's $0.001 par
value Common Stock authorized, of which 58 billion shares were classified as
Class B Common Stock (Prime Fund -- 15 billion Pacific Horizon Shares, 28
billion Horizon Shares and 15 billion Horizon Service Shares).
75
<PAGE> 78
Transactions in shares of the Prime Fund (at $1.00 per share) for the
periods indicated are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 29, 1996 FEBRUARY 28, 1995
----------------- -----------------
<S> <C> <C>
PACIFIC HORIZON SHARES:
Shares sold............................................ 6,558,828,164 5,272,091,603
Shares issued to shareholders in reinvestment of
dividends............................................ 63,228,495 19,756,810
Shares redeemed........................................ (5,551,677,079) (5,379,915,571)
--------------- --------------
Net increase (decrease) in Pacific Horizon Shares....... 1,070,379,580 (88,067,158)
--------------- --------------
HORIZON SHARES:
Shares sold............................................ 10,005,418,206 9,961,911,460
Shares issued to shareholders in reinvestment of
dividends............................................ 18,014,180 11,806,370
Shares issued in connection with reorganization
with 231 Funds....................................... 971,168,989 --
Shares redeemed........................................ (9,966,301,034) (13,196,902,924)
--------------- --------------
Net increase (decrease) in Horizon Shares............... 1,028,300,341 (3,223,185,094)
--------------- --------------
HORIZON SERVICE SHARES:
Shares sold............................................ 14,233,621,259 7,545,587,777
Shares issued to shareholders in reinvestment of
dividends............................................ 32,049,452 12,981,295
Shares issued in connection with reorganization
with 231 Funds....................................... 140,144,817 --
Shares redeemed........................................ (13,708,704,961) (7,533,904,759)
--------------- --------------
Net increase in Horizon Service Shares.................. 697,110,567 24,664,313
--------------- --------------
Total increase (decrease) in Portfolio shares........... 2,795,790,488 (3,286,587,939)
=============== ==============
</TABLE>
76
<PAGE> 79
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights++
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29, 28, 28, 28, 29,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
Net asset value per share, beginning
of year.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................ 0.0539 0.0424 0.0287 0.0340 0.0558
Net realized gain (loss) on
securities......................... 0.0004 (0.0227) (0.0016) -- 0.0005
-------- -------- -------- -------- --------
Total income from investment
operations........................... 0.0543 0.0197 0.0271 0.0340 0.0563
Less dividends from net investment
income............................... (0.0539) (0.0422) (0.0287) (0.0341) (0.0557)
Increase due to voluntary capital
contribution from Investment Adviser
(Note 3)............................. -- 0.0233 -- -- --
-------- -------- -------- -------- --------
Net change in net asset value per
share................................ 0.0004 0.0008 (0.0016) (0.0001) 0.0006
-------- -------- -------- -------- --------
Net asset value per share,
end of year.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return.......................... 5.53% 4.30%+ 2.91% 3.45% 5.72%
Ratios/Supplemental Data:
Net assets, end of year (millions)... $ 2,200 $ 1,129 $ 1,216 $ 992 $ 1,413
Ratio of expenses to average net
assets (with fee waivers and/or
reimbursements).................... 0.55% 0.51% 0.52% 0.55% 0.56%
Ratio of net investment income to
average net assets (with fee
waivers and/or reimbursements)..... 5.37% 4.19% 2.86% 3.42% 5.51%
Ratio of expenses to average net
assets (without fee waivers and/or
reimbursements)*................... 0.56% 0.56% 0.53% (a) (a)
Ratio of net investment income
to average net assets (without
fee waivers and/or
reimbursements)*................... 5.36% 4.14% 2.85% (a) (a)
</TABLE>
- ---------------
++ Security Pacific National Bank served as Investment Adviser through April
21, 1992. Bank of America National Trust and Savings Association served as
Investment Adviser commencing April 22, 1992.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Adviser (see Note 3 to Financial Statements). Without this
capital contribution, the total return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
See Notes to Financial Statements.
77
<PAGE> 80
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights++
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29, 28, 28, 28, 29,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
HORIZON SHARES
Net asset value per share, beginning
of year............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.............. 0.0571 0.0461 0.0319 0.0372 0.0590
Net realized gain (loss) on
securities....................... 0.0004 (0.0232) (0.0016) -- 0.0005
-------- -------- -------- -------- --------
Total income from investment
operations......................... 0.0575 0.0229 0.0303 0.0372 0.0595
Less dividends from net investment
income............................. (0.0571) (0.0454) (0.0319) (0.0372) (0.0589)
Increase due to voluntary capital
contribution from Investment
Adviser (Note 3)................... -- 0.0233 -- -- --
-------- -------- -------- -------- --------
Net change in net asset value per
share.............................. 0.0004 0.0008 (0.0016) -- 0.0006
-------- -------- -------- -------- --------
Net asset value per share,
end of year........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return........................ 5.86% 4.63%+ 3.24% 3.78% 6.06%
Ratios/Supplemental Data:
Net assets, end of year
(millions)....................... $ 1,651 $ 622 $ 3,840 $10,301 $ 2,855
Ratio of expenses to average net
assets (with fee waivers and/or
reimbursements).................. 0.23% 0.16% 0.20% 0.23% 0.24%
Ratio of net investment income
to average net assets (with
fee waivers and/or
reimbursements).................. 5.69% 4.11% 3.19% 3.59% 5.59%
Ratio of expenses to average net
assets (without fee waivers
and/or reimbursements)*.......... 0.24% 0.23% 0.21% (a) (a)
Ratio of net investment income
to average net assets (without
fee waivers and/or
reimbursements)*................. 5.68% 4.04% 3.18% (a) (a)
</TABLE>
- ---------------
++ Security Pacific National Bank served as Investment Adviser through April
21, 1992. Bank of America National Trust and Savings Association served as
Investment Adviser commencing April 22, 1992.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Adviser (see Note 3 to Financial Statements). Without this
capital contribution, the total return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
See Notes to Financial Statements.
78
<PAGE> 81
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights++
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29, 28, 28, 28, 29,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
Net asset value per share, beginning
of year.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................ 0.0546 0.0431 0.0294 0.0345 0.0565
Net realized gain (loss) on
securities......................... 0.0004 (0.0227) (0.0016) -- 0.0005
-------- -------- -------- -------- --------
Total income from investment
operations........................... 0.0550 0.0204 0.0278 0.0345 0.0570
Less dividends from net investment
income............................... (0.0546) (0.0429) (0.0294) (0.0347) (0.0564)
Increase due to voluntary capital
contribution from investment advisor
(Note 3)............................. -- 0.0233 -- -- --
-------- -------- -------- -------- --------
Net change in net asset value
per share............................ 0.0004 0.0008 (0.0016) (0.0002) 0.0006
-------- -------- -------- -------- --------
Net asset value per share,
end of year.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return.......................... 5.60% 4.37%+ 2.98% 3.53% 5.79%
Ratios/Supplemental Data:
Net assets, end of year (millions)... $ 1,561 $ 864 $ 839 $ 793 $ 859
Ratio of expenses to average net
assets (with fee waivers and/or
reimbursements).................... 0.48% 0.44% 0.45% 0.48% 0.49%
Ratio of net investment income to
average net assets (with fee
waivers and/or reimbursements)..... 5.44% 4.31% 2.94% 3.49% 5.58%
Ratio of expenses to average net
assets (without fee waivers and/or
reimbursements)*................... 0.49% 0.48% 0.46% (a) (a)
Ratio of net investment income
to average net assets (without
fee waivers and/or
reimbursements)*................... 5.43% 4.27% 2.93% (a) (a)
</TABLE>
- ---------------
++ Security Pacific National Bank served as Investment Adviser through April
21, 1992. Bank of America National Trust and Savings Association served as
Investment Adviser commencing April 22, 1992.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Adviser (see Note 3 to Financial Statements). Without this
capital contribution, the total return would have been lower.
(a) There were no fee waivers or reimbursements during the period.
See Notes to Financial Statements.
79
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Board of Directors
and Shareholders of
Pacific Horizon Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Pacific Horizon Prime Fund (one of
the portfolios constituting the Pacific Horizon Funds, Inc., hereafter referred
to as the "Funds") at February 29, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
February 29, 1996 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
April 22, 1996
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FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
-------------------------------------------------------------
Pacific Horizon Prime Fund has determined that all dividends paid during
the year ended February 29, 1996 were paid from net investment income and
are subject to Federal income tax.
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80
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52-9067 rev 4/96
COPSEAF96A
