<PAGE> 1
PACIFIC HORIZON INCOME FUNDS
SEMI-ANNUAL REPORT
AUGUST 31, 1997
U.S. GOVERNMENT SECURITIES FUND
CORPORATE BOND FUND
INTERMEDIATE BOND FUND
INVESTING FOR ALL
THE TIMES OF YOUR LIFE
NOT FDIC INSURED
PACIFIC HORIZON INCOME FUNDS
<PAGE> 2
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
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<PAGE> 3
Contents
<TABLE>
<S> <C>
. FUND FACTS 2-3
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
. PACIFIC HORIZON U.S.
. GOVERNMENT SECURITIES FUND AND
. CORPORATE BOND FUND
. Portfolios of Investments 10-12
. Statements of Assets
. and Liabilities 13-14
. Statements of Operations 15-16
. Statements of Changes
. in Net Assets 17-18
. PACIFIC HORIZON INTERMEDIATE BOND
. FUND
. Statement of Assets
. and Liabilities 19
. Statement of Operations 20
. Statements of Changes
. in Net Assets 21
. Notes to Financial Statements 22-29
. Financial Highlights 30-39
. MASTER INVESTMENT TRUST, SERIES
. I -- INVESTMENT
. GRADE BOND PORTFOLIO
. Portfolio of Investments 40-41
. Statement of Assets
. and Liabilities 42
. Statement of Operations 43
. Statements of Changes
. in Net Assets 44
. Notes to Financial Statements 45-47
. Supplementary Data 48
</TABLE>
<PAGE> 4
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 5
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
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3
<PAGE> 6
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 7
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 8
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 9
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 10
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 11
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 12
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
DESCRIPTION RATE MATURITY DATE AMOUNT VALUE (NOTE 2)
- ----------------------------------- ----- --------------------- ----------- --------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 93.2%
Government National Mortgage
Association*.................... 11.50% 2/15/98 to 2/15/00 $ 10,000 $ 11,090
Government National Mortgage
Association*.................... 11.00% 2/15/98 to 9/20/19 428,000 460,653
Government National Mortgage
Association*.................... 10.50% 12/15/97 to 4/15/21 1,926,000 2,059,573
Government National Mortgage
Association*.................... 10.00% 10/15/98 to 3/15/21 916,000 987,390
Government National Mortgage
Association*.................... 9.50% 3/15/98 to 4/20/06 1,214,000 1,282,817
Government National Mortgage
Association*.................... 9.00% 6/15/01 to 6/15/07 329,000 346,145
Government National Mortgage
Association*.................... 8.50% 10/15/09 to 6/15/26 4,855,000 5,112,117
Government National Mortgage
Association*.................... 8.00% 1/15/20 to 12/15/22 14,536,000 15,017,554
Government National Mortgage
Association*.................... 7.50% 4/15/22 to 12/15/25 19,316,000 19,578,868
Government National Mortgage
Association*.................... 7.00% 12/15/08 to 8/15/25 13,590,000 13,626,640
Government National Mortgage
Association*.................... 6.50% 4/15/26 to 6/15/26 10,599,000 10,234,258
Government National Mortgage
Association*.................... 6.00% 12/15/10 439,000 430,906
-----------
TOTAL INVESTMENTS -- 93.2%
(COST $68,095,936)(a)............. 69,148,011
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 6.8%............... 5,073,978
-----------
NET ASSETS -- 100.0%............... $ 74,221,989
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $74,221,989.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................................... $ 1,237,727
Unrealized depreciation..................................................... (185,652)
-----------
Net unrealized appreciation................................................. $ 1,052,075
=============
</TABLE>
* Mortgage-backed pass-through obligation.
See Notes to Financial Statements.
10
<PAGE> 13
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------------- -------------- ----- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSET-BACKED SECURITIES -- 3.6%
The Money Store Home Equity Trust
Series 1996-B (Cost $1,299,238)...... Aaa/AAA 7.38% 05/15/17 $1,300,000 $ 1,329,822
-----------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 4.7%
Citibank Credit Card Master Trust I
Series 1996-1+....................... Aaa/AAA 0.00% 02/07/03 1,000,000 806,630
Citibank Credit Card Master Trust I
Series 1997-6+....................... Aaa/NR 0.00% 08/15/06 1,500,000 933,925
Prudential Mortgage Cap................ Aaa/AAA 11.58% 12/15/13 3,788 3,788
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST $1,768,188).......... 1,744,343
-----------
CORPORATE BONDS -- 63.8% BANKS -- 15.2%
ABN-AMRO Bank NV....................... Aa2/AA- 7.75% 05/15/23 1,350,000 1,400,248
Chase Manhattan Corp................... A1/A- 8.13% 06/15/02 1,000,000 1,059,248
Comerica Bank.......................... A2/A- 8.38% 07/15/24 1,000,000 1,078,508
Fuji Bank (Cayman), Ltd................ A3/NR 7.30% 03/29/49 1,000,000 1,003,097
Midland Bank PLC....................... A1/A 7.63% 06/15/06 1,000,000 1,044,726
-----------
5,585,827
-----------
BEVERAGES -- 2.6%
Anheuser Busch Cos., Inc............... A1/A+ 7.00% 12/01/25 1,000,000 954,822
-----------
DIVERSIFIED MANUFACTURING -- 2.4%
Allied Signal Corp..................... A2/A 9.50% 06/01/16 719,000 888,759
-----------
ENTERTAINMENT -- 2.7%
Walt Disney Co......................... A2/A 6.75% 03/30/06 1,000,000 1,001,754
-----------
FINANCIAL SERVICES -- 14.8%
Bear Stearns Co., Inc.................. A2/A 6.50% 07/05/00 1,000,000 1,002,840
BHP Finance USA Ltd.................... A2/A 6.42% 03/01/26 1,400,000 1,387,750
Hartford Life, Inc..................... A2/A 6.90% 06/15/04 1,500,000 1,507,258
International Lease Finance Corp....... A1/A+ 6.88% 05/01/01 1,500,000 1,515,777
-----------
5,413,625
-----------
FOOD & KINDRED PRODUCTS -- 5.1%
ConAgra, Inc........................... Baa2/BBB 9.75% 03/01/21 1,500,000 1,879,212
-----------
INSURANCE -- 3.0%
Commercial Credit...................... A1/A+ 7.88% 02/01/05 1,000,000 1,095,508
-----------
RADIO & TV -- 8.3%
British Telecom Finance................ Aa1/AAA 9.63% 02/15/19 1,300,000 1,413,407
Tele-Communications, Inc............... Ba1/BBB- 9.88% 06/15/22 1,400,000 1,637,560
-----------
3,050,967
-----------
RENTAL & LEASE EQUIPMENT -- 2.8%
Hertz Corp............................. A3/A- 7.38% 06/15/01 1,000,000 1,025,980
-----------
RETAIL -- 2.8%
Sears Roebuck Acceptance Corp.......... A2/A- 7.00% 06/15/07 1,000,000 1,002,946
-----------
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
<TABLE>
<CAPTION>
MOODY'S/
S&P
RATINGS MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------------- -------------- ----- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
SECURITY BROKER/DEALERS -- 4.1%
Merrill Lynch & Co., Inc............... Aa3/AA- 7.00% 03/15/06 $1,500,000 $ 1,510,899
-----------
TOTAL CORPORATE BONDS (COST $22,462,119) 23,410,299
-----------
MEDIUM TERM NOTES -- 27.1%
AUTOMOBILES -- 6.8%
Ford Motor Credit Co................... A1/A+ 5.75% 01/25/01 1,000,000 978,493
General Motors Acceptance Corp......... A3/A- 6.60% 01/17/01 1,500,000 1,503,996
-----------
2,482,489
-----------
BANKS -- 4.0%
NationsBank Corp....................... A1/A+ 6.09% 12/14/01 1,500,000 1,472,895
-----------
FINANCIAL SERVICES -- 8.2%
Associates Corp. N.A................... Aa3/AA- 6.95% 08/01/02 1,000,000 1,010,659
Countrywide Funding Corp............... A3/A 6.54% 04/14/00 1,000,000 1,001,435
Ikon Capital, Inc...................... A3/A- 6.73% 06/15/01 1,000,000 1,001,120
-----------
3,013,214
-----------
INSURANCE -- 2.6%
UNUM Corp.............................. A1/A+ 5.88% 10/15/03 1,000,000 952,346
-----------
RETAIL STORES -- 2.6%
Penney J.C. & Co....................... A2/A 6.50% 12/15/07 1,000,000 961,656
-----------
UTILITIES -- 2.9%
Pacific Gas & Electric................. A2/A 7.88% 04/08/14 1,000,000 1,056,263
-----------
TOTAL MEDIUM TERM NOTES (COST
$9,824,823)............................ 9,938,863
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------
<S> <C> <C> <C> <C> <C>
TEMPORARY INVESTMENTS -- 1.8%
Temporary Investment Fund............. 327,940 327,940
Temporary Investment Cash Fund........ 327,940 327,940
-----------
TOTAL TEMPORARY INVESTMENTS (COST
$655,880)............................. 655,880
-----------
TOTAL INVESTMENTS -- 101.0% (COST
$36,010,248)(a)....................... 37,079,207
LIABILITIES IN EXCESS OF
ASSETS -- 1.0%........................ (362,580)
-----------
NET ASSETS -- 100.0%................... $36,716,627
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $36,716,627.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................. $1,180,052
Unrealized depreciation.................................. (111,093)
-----------
Net unrealized appreciation.............................. $1,068,959
===========
</TABLE>
+ Zero Coupon Bond.
See Notes to Financial Statements.
12
<PAGE> 15
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $68,095,936).............. $69,148,011
Cash................................................................ 5,165,805
Interest receivable................................................. 448,740
Receivable for capital shares sold.................................. 3,397
Prepaid expenses.................................................... 4,109
-----------
Total Assets.......................................................... 74,770,062
-----------
LIABILITIES:
Dividends Payable................................................... 408,548
Payable for capital shares redeemed................................. 11,536
Investment advisory fees payable.................................... 3,787
Administration fees payable......................................... 1,893
Shareholder service fees payable (A Shares)......................... 15,637
Shareholder service fees payable (K Shares)......................... 140
12b-1 fees payable (K Shares)....................................... 251
Custodian and fund accounting fees payable.......................... 34,497
Transfer agent fees payable......................................... 41,270
Legal fees payable.................................................. 1,924
Other accrued expenses.............................................. 28,590
-----------
Total Liabilities..................................................... 548,073
-----------
NET ASSETS............................................................ $74,221,989
===========
Net Assets
A Shares............................................................ $73,604,908
K Shares............................................................ 617,081
-----------
Total................................................................. $74,221,989
===========
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares............................................................ 7,825,208
K Shares............................................................ 65,573
-----------
Total................................................................. 7,890,781
===========
NET ASSET VALUE
A Shares -- redemption price per share.............................. $9.41
=====
Maximum Sales Charge (A Shares)..................................... 4.50%
Maximum Offering Price (A Shares)
(Net Asset Value of A Shares/(100% -- Maximum Sales Charge))...... $9.85
=====
K Shares -- offering and redemption price per share................. $9.41
COMPOSITION OF NET ASSETS: =====
Shares of common stock, at par...................................... $ 7,891
Additional paid-in capital.......................................... 83,646,252
Distributions in excess of net investment income.................... (532,412)
Accumulated net realized losses on investment transactions.......... (9,951,817)
Net unrealized appreciation on investments.......................... 1,052,075
-----------
NET ASSETS, AUGUST 31, 1997........................................... $74,221,989
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
13
<PAGE> 16
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $36,010,248)................ $37,079,207
Interest Receivable................................................... 669,075
Receivable for capital shares sold.................................... 5,498
Prepaid expenses...................................................... 6,767
-----------
Total Assets............................................................ 37,760,547
-----------
LIABILITIES:
Dividends Payable..................................................... 131,217
Payable for investment securities purchased........................... 803,711
Payable for capital shares redeemed................................... 14,224
Shareholder service fees payable (A and K Shares)..................... 16,065
12b-1 fees payable (K Shares)......................................... 104
Custodian and fund accounting fees payable............................ 18,152
Transfer agent fees payable........................................... 1,390
Legal fees payable.................................................... 650
Other accrued expenses................................................ 58,407
-----------
Total Liabilities....................................................... 1,043,920
-----------
NET ASSETS.............................................................. $36,716,627
===========
Net Assets
A Shares.............................................................. $36,465,009
K Shares.............................................................. 251,618
-----------
Total................................................................... $36,716,627
===========
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares.............................................................. 2,283,075
K Shares.............................................................. 15,751
-----------
Total................................................................... 2,298,826
-----------
NET ASSET VALUE
A Shares -- redemption price per share................................ $15.97
======
Maximum Sales Charge (A Shares)....................................... 4.50%
Maximum Offering Price (A Shares).....................................
(Net Asset Value of A Shares/(100% -- Maximum Sales Charge))........ $16.72
======
K Shares -- offering and redemption price per share................... $15.97
COMPOSITION OF NET ASSETS: ======
Shares of common stock, at par........................................ $ 2,299
Additional paid-in capital............................................ 42,179,214
Accumulated net realized losses on investment transactions............ (6,533,845)
Net unrealized appreciation on investments............................ 1,068,959
-----------
NET ASSETS, AUGUST 31, 1997............................................. $36,716,627
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 17
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.............................................................. $2,641,378
----------
EXPENSES:
Investment advisory fees.............................................. 129,845
Administration fees................................................... 74,198
Shareholder service fees (A Shares)................................... 92,148
Shareholder service fees (K Shares)................................... 609
12b-1 fees (K Shares)................................................. 1,826
Custodian and fund accounting fees.................................... 54,571
Transfer agent fees................................................... 62,588
Legal fees............................................................ 3,220
Other expenses........................................................ 64,206
----------
Total Expenses.................................................. 483,211
Less: Fee waivers................................................... (168,132)
----------
Total Net Expenses...................................................... 315,079
----------
NET INVESTMENT INCOME................................................... 2,326,299
----------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions......................... 37,185
Net change in unrealized appreciation on investments.................. 910,045
----------
Net realized/unrealized gains on investments............................ 947,230
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $3,273,529
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 18
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................... $1,273,712
----------
EXPENSES:
Advisory fees.......................................................... 79,441
Administration fees.................................................... 35,307
Shareholder service fees (A and K Shares).............................. 44,134
12b-1 fees (K Shares).................................................. 587
Custodian and fund accounting fees..................................... 33,541
Transfer agent fees.................................................... 22,133
Legal fees............................................................. 572
Other expenses......................................................... 80,393
----------
Total Expenses....................................................... 296,108
Less: Fee waivers and reimbursements..................................... (132,072)
----------
Total Net Expenses....................................................... 164,036
----------
NET INVESTMENT INCOME.................................................... 1,109,676
----------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions.......................... 219,516
Net change in unrealized appreciation on investments................... 222,337
----------
Net realized/unrealized gain on investments.............................. 441,853
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $1,551,529
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 19
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................... $ 2,326,299 $ 4,945,657
Net realized gain (loss) on investment
transactions...................................... 37,185 (1,656,989)
Net change in unrealized appreciation on
investments....................................... 910,045 682,024
----------- ------------
Change in net assets resulting from operations........ 3,273,529 3,970,692
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
A Shares.......................................... (2,422,154) (4,941,264)
K Shares.......................................... (14,688) (4,394)(a)
Excess of net investment income
A Shares.......................................... -- (183,185)
Tax return of capital
A Shares.......................................... -- (126,969)
K Shares.......................................... -- (712)(a)
----------- ------------
Change in net assets from shareholder distributions... (2,436,842) (5,256,524)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued......................... 5,864,725 8,846,354
Dividends reinvested................................ 1,670,389 3,659,415
Cost of shares redeemed............................. (9,052,270) (25,808,410)
----------- ------------
Change in net assets from capital share
transactions........................................ (1,517,156) (13,302,641)
----------- ------------
Change in net assets.................................. (680,469) (14,588,473)
NET ASSETS
Beginning of Period................................. 74,902,458 89,490,931
----------- ------------
End of Period (including distributions in excess of
$532,412 and $391,623, respectively).............. $ 74,221,989 $ 74,902,458
=========== ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
17
<PAGE> 20
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................. $ 1,109,676 $ 1,877,912
Net realized gains on investment transactions..... 219,516 63,577
Net change in unrealized appreciation on
investments..................................... 222,337 (691,865)
---------------- -----------------
Change in net assets from operations................ 1,551,529 1,249,624
---------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
A Shares........................................ (1,102,953) (1,874,744)
K Shares........................................ (6,723) (3,168)(a)
---------------- -----------------
Change in net assets from shareholder
distributions..................................... (1,109,676) (1,877,912)
---------------- -----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued....................... 7,676,505 8,896,314
Dividends reinvested.............................. 419,354 623,621
Cost of shares redeemed........................... (4,848,577) (8,251,569)
---------------- -----------------
Change in net assets from capital share
transactions...................................... 3,247,282 1,268,366
---------------- -----------------
Change in net assets................................ 3,689,135 640,078
NET ASSETS
Beginning of Period............................... 33,027,492 32,387,414
---------------- -----------------
End of Period..................................... $ 36,716,627 $33,027,492
============== ===============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
18
<PAGE> 21
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I --
Investment Grade Bond Portfolio, at value........................... $71,907,385
Deferred organization costs and prepaid expenses...................... 2,410
-----------
Total Assets............................................................ 71,909,795
-----------
LIABILITIES:
Reports to shareholders expenses payable.............................. 46,269
Fund accounting fees and expenses payable............................. 9,218
Audit fees payable.................................................... 7,622
Transfer agent fees payable........................................... 11,839
Other accrued expenses................................................ 30,216
-----------
Total Liabilities....................................................... 105,164
-----------
NET ASSETS.............................................................. $71,804,631
===========
Net Assets:
A Shares.............................................................. $35,305,694
K Shares.............................................................. 415,143
SRF Shares............................................................ 36,083,794
-----------
Total................................................................... $71,804,631
===========
Shares Outstanding ($0.001 par value, and 300 million shares
authorized):
A Shares.............................................................. 3,678,885
K Shares.............................................................. 43,280
SRF Shares............................................................ 3,359,281
-----------
Total................................................................... 7,081,446
===========
NET ASSET VALUE
A Shares -- redemption price per share................................ $9.60
=====
Maximum Sales Charge (A Shares)....................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge))..................................... $10.05
======
K Shares -- offering and redemption price per share................... $9.59
=====
SRF Shares -- offering and redemption price per share................. $10.74
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par........................................ $ 7,081
Additional paid-in capital............................................ 74,309,647
Distributions in excess of net investment income...................... (10,633)
Accumulated net realized losses on investment transactions............ (2,803,251)
Net unrealized depreciation on investments............................ 301,787
-----------
NET ASSETS, AUGUST 31, 1997............................................. $71,804,631
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 22
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I --
Investment Grade Bond Portfolio:
Interest Income................................................... $ 1,403,839
-----------
Expenses.......................................................... 73,190
Less: Fee waivers and expense reimbursements...................... (42,931)
-----------
30,259
-----------
Net Investment Income from Master Investment Trust,
Series I -- Investment Grade Bond Portfolio....................... 1,373,580
-----------
EXPENSES:
Registration fees................................................. 25,769
Shareholder service fees (A Shares)............................... 36,384
Shareholder service fees (K Shares)............................... 465
Shareholder service fees (SRF Shares)............................. 17,401(a)
12b-1 fees (K Shares)............................................. 938
Administration fees............................................... 32,369
Transfer Agent fees............................................... 22,010
Fund accounting fees and expenses................................. 28,650
Reports to shareholders........................................... 33,866
Amortization of organization costs................................ 15,088
Audit fees........................................................ 6,982
Legal fees........................................................ 718
Directors fees.................................................... 285
Other operating expenses.......................................... 3,103
-----------
Total Expenses.............................................. 224,028
Less: Fee waivers and reimbursements................................ (64,175)
-----------
Total Net Expenses.................................................. 159,853
-----------
NET INVESTMENT INCOME............................................... 1,213,727
-----------
REALIZED / UNREALIZED GAINS (LOSSES) ON INVESTMENTS FROM MASTER
INVESTMENT TRUST, SERIES I -- INVESTMENT GRADE BOND PORTFOLIO
Net realized losses on investment transactions.................... (2,642,763)
Net change in unrealized depreciation on investments.............. 429,712
-----------
Net realized / unrealized losses on investments from Master
Investment Trust Series I -- Investment Grade Bond Portfolio...... (2,213,051)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ (999,324)
===========
</TABLE>
(a) Seafirst Retirement Funds were reorganized into the Pacific Horizon Funds on
June 23, 1997, creating the SRF Shares.
- ---------------
See Notes to Financial Statements.
20
<PAGE> 23
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997(a)
---------------- --------------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.......................... $ 1,213,727 $ 878,883
Net realized loss on investment transactions... (2,642,763) (159,361)
Net change in unrealized depreciation on
investments.................................. 429,712 (86,639)
---------------- --------------------
Change in net assets resulting from
operation.................................... (999,324) 632,883
---------------- --------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares..................................... (826,193) (874,813)
K Shares..................................... (9,753) (4,070)(a)
SRF Shares (b)............................... (392,509) --
Net realized gains from investment
transactions:
A Shares..................................... -- (93,821)
K Shares..................................... -- (7)(a)
SRF Shares (b)............................... -- --
---------------- --------------------
Change in net assets from shareholder
distributions.................................. (1,228,455) (972,711)
---------------- --------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................... 57,743,694 16,917,463
Dividends reinvested........................... 669,060 488,201
Cost of shares redeemed........................ (7,649,365) (6,976,214)
---------------- --------------------
Change in net assets from capital share
transactions................................... 50,763,389 10,429,450
---------------- --------------------
Change in net assets............................. 48,535,610 10,089,622
NET ASSETS
Beginning of Period............................ 23,269,021 13,179,399
---------------- --------------------
End of Period (including distributions in
excess of $10,633 and undistributed net
investment income of $4,095, respectively)... $ 71,804,631 $ 23,269,021
============== ==================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) On June 23, 1997, Bond Fund of Seafirst Retirement Funds withdrew its
investments in Master Investment Trust Series I and merged its assets with
the Intermediate Bond Fund creating a new class of SRF Shares on that date.
See Notes to Financial Statements.
21
<PAGE> 24
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon U.S. Government
Securities Fund (the "U.S. Government Securities Fund"), the Pacific Horizon
Corporate Bond Fund (the "Corporate Bond Fund") and the Pacific Horizon
Intermediate Bond Fund (the "Intermediate Bond Fund"), collectively the "Funds",
individually the "Fund". The Funds offer A Shares, and effective July 22, 1996
began offering K Shares. On June 23, 1997 the Seafirst Bond Fund merged into the
Pacific Horizon Intermediate Bond Fund and the Pacific Horizon Intermediate Bond
Fund began offering SRF Shares. A Shares have a Shareholder Services Plan, K
Shares have a Distribution Plan and Administrative and Shareholder Services
Plan, and the SRF Shares have a Shareholder Services Plan.
The U.S. Government Securities Fund seeks to provide investors with a high
level of current income, consistent with preservation of capital. The U.S.
Government Securities Fund does so by investing primarily in instruments issued
by the Government National Mortgage Association. The Corporate Bond Fund seeks
to provide investors with high current income consistent with reasonable
investment risk. The Corporate Bond Fund invests primarily in a diversified
portfolio of investment grade corporate debt securities. The Intermediate Bond
Fund seeks to achieve its investment objective by investing substantially all of
its assets in the Investment Grade Bond Portfolio (the "Portfolio") of the
Master Investment Trust, Series I (the "Trust"), an open-end management
investment company, that has the same investment objectives as that of the Fund.
The value of the Intermediate Bond Fund's investment in the Portfolio included
in the accompanying Statement of Assets and Liabilities reflects the
Intermediate Bond Fund's proportionate beneficial interest in the net assets of
the Portfolio (58.9% at August 31, 1997). The financial statements of the
Portfolio, including its portfolio of investments, are included elsewhere within
this report and should be read in conjunction with the Intermediate Bond Fund's
financial statements.
Prior to September 1, 1996, the Corporate Bond Fund sought to achieve its
investment objective by investing substantially all of its assets in the
Corporate Bond Portfolio of the Trust, which had the same investment objective
as that of the Fund. Effective September 1, 1996, the Fund withdrew its
investment in the Corporate Bond Portfolio and began investing its assets
directly in investment securities.
22
<PAGE> 25
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Funds' administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI") will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the
23
<PAGE> 26
Funds in the 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.
PORTFOLIO VALUATIONS:
The U.S. Government Securities Fund and the Corporate Bond Fund value
portfolio securities (other than debt securities with remaining maturities of 60
days or less) at the last reported sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
NASDAQ National Securities Market. Securities not listed on an exchange or the
NASDAQ National Securities Market or securities for which there were no
transactions are valued at the mean between the current quoted bid and ask
prices on the date of valuation. Bid price is used when no ask price is
available. The Funds may also use an independent pricing service, approved by
the Board of Directors, to value certain of their 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 Directors. Debt
securities with remaining maturities of 60 days or less are valued at amortized
cost.
The valuation of securities of the Intermediate Bond Fund's investment in
the Portfolio is discussed in Note 2 to the Portfolio's financial statements.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The U.S. Government Securities Fund and Corporate Bond Fund record security
transactions on a trade date basis. Interest income, including accretion of
discount and amortization of premium, is accrued daily. Dividend income is
recognized on the ex-dividend date. Realized gains and losses from security
transactions are recorded on the identified cost basis.
The Intermediate Bond Fund records its share of the investment income,
expenses and realized and unrealized gains and losses recorded by the Portfolio
on a daily basis. The investment income, expenses and realized and unrealized
gains and losses are allocated daily to investors in the Portfolio based upon
the value of their investments in the Portfolio. Such investments are adjusted
on a daily basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and real-
24
<PAGE> 27
ized and unrealized gains and losses are incurred.
The Intermediate Bond Fund incurred certain costs in connection with its
organization. Such costs have been deferred and are being amortized on a
straight-line basis over five years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The U.S. Government Fund's and Corporate Bond Fund's net investment income
is declared daily and paid monthly as a dividend to shareholders of record at
the close of business on record date. Intermediate Bond Fund's net investment
income is declared monthly and paid within five business days after the end of
each month as a dividend to shareholders of record. Net realized gains on
portfolio securities, if any, are distributed at least annually. However, to the
extent net realized gains can be offset by capital loss carryovers of the Funds,
such gains will not be distributed. Dividends and distributions are recorded by
the Funds on the ex-dividend date.
The amount of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
-------------- --------------
<S> <C> <C>
U.S. Government
Securities Fund......... $106,874 $ (6,926)
Corporate Bond Fund...... 66,324 738,059
Intermediate Bond Fund... 4,095 (4,095)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely all of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the U.S. Government Securities Fund, the Corporate
Bond Fund and the Intermediate Bond
25
<PAGE> 28
Fund had the following net capital loss carryovers:
<TABLE>
<CAPTION>
CAPITAL
LOSS
FUND CARRYOVER
- ------------------------------- ----------
<S> <C> <C>
U.S. Government Securities..... $8,325,087 2003
1,663,915 2005
----------
$9,989,002
==========
Corporate Bond Fund............ $ 442,467 1998
5,401,993 1999
882,649 2003
----------
$6,727,109
==========
Intermediate Bond Fund......... $ 160,488 2005
==========
</TABLE>
To the extent that these carryovers are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders.
During the year the Corporate Bond Fund utilized $89,829 of its available
capital loss carryover to offset realized capital gains for federal income tax
purposes, while capital loss carryovers of $738,058 expired.
Capital losses incurred after October 31 for the Funds' are deemed to arise
on the first business day of the following fiscal year for tax purposes. The
Corporate Bond Fund has incurred and elected to defer such capital losses of
$26,252 after October 31, 1996.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The U.S. Government Securities Fund and Corporate Bond Fund have an
Investment Advisory Agreement with Bank of America. For the six months ended
August 31, 1997, the Funds had an Administration Agreement with BISYS and a
Distribution Agreement with the Distributor. Pursuant to the terms of the
Investment Advisory Agreement, Bank of America is entitled to a fee from the
U.S. Government Securities Fund and Corporate Bond Fund, which is accrued daily
and payable monthly, at an annual rate of 0.35% and 0.45% of the U.S. Government
Securities Fund's and Corporate Bond Fund's respective average daily net assets.
For the six months ended August 31, 1997, Bank of America agreed to waive
$105,711 and $79,441 for the U.S. Government Securities Fund and Corporate Bond
Fund, respectively. Pursuant to the terms of the Administration Agreement, BISYS
is entitled to a fee, which is accrued daily and payable monthly, at an annual
rate of 0.20%, 0.15% and 0.15% of the average daily net assets of the U.S.
Government Securities Fund, Corporate Bond Fund, and Intermediate Bond Fund,
respectively. For the six months ended August 31, 1997, BISYS agreed to waive
$61,812, $35,307 and $32,369 of its fee as Administrator for the U.S. Government
Securities Fund, Corporate Bond Fund and Intermediate Bond Fund, respectively.
For the same period, Bank of America and BISYS reimbursed $8,163 of operating
expenses of the Corporate Bond Fund.
For the six months ended August 31, 1997, the Distributor advised the Funds
that it retained $1,993, $1,078, and $504, respectively, from commissions earned
on sales of the U.S. Government Securities Fund, the Corporate Bond Fund and the
Intermediate Bond Fund's shares, respectively. For the same period, Bank of
America and its affiliates advised the Funds that they retained $15,786, $8,452,
and $3,950 from commissions earned on sales of shares of the U.S. Government
Securi-
26
<PAGE> 29
ties Fund, Corporate Bond Fund, and Intermediate Bond Fund, respectively.
The Funds have a Shareholder Services Plan (the "Plan") under which each
Fund pays the Distributor for shareholder servicing expenses incurred in
connection with A Shares of each Fund. Under the Plan, payments for shareholder
servicing expenses may not exceed 0.25% of each Fund's average daily net assets
for A Shares. For the six months ended August 31, 1997, the U.S. Government
Securities Fund, Corporate Bond Fund, and Intermediate Bond Fund incurred
charges of $92,148, $43,835, and $36,384, respectively, pursuant to the Plan.
The Funds were advised that of these amounts, the Distributor retained $5,662,
$25,753, and $9,748, from the U.S. Government Securities Fund, Corporate Bond
Fund, and Intermediate Bond Fund, respectively, and affiliates of Bank of
America retained $83,038, $5,311, and $3,052, respectively. The Plan provides
that if, in any month, the fees paid to the Distributor are less than the costs
incurred by the Distributor, the excess costs will be included in future
computations of the fee, provided that any excess costs will not be carried
forward beyond the end of the fiscal year in which such excess costs were
incurred. For the six months ended August 31, 1997, BISYS waived $8,926 and
$25,683 for the Corporate Bond Fund and Intermediate Bond Fund.
The Funds have adopted a Distribution Plan and an Administrative and
Shareholder Services Plan (the "Administrative Plan") with respect to K Shares
of the Funds. Under the Distribution Plan, the Funds pay the Distributor for
expenses primarily intended to result in the sale of the Funds' K Shares. Under
the Distribution Plan, payments by the Funds for distribution expenses may not
exceed 0.75% of the average daily net assets of each Fund's K Shares. Payments
for distribution expenses under the Distribution Plan are subject to Rule 12b-1
under the Act. Under the Administrative Plan, the Funds pay for expenses
incurred in connection with shareholder services provided by the Distributor and
payments to Service Organizations for the provision of support services with
respect to beneficial owners of K Shares. Under the Administrative Plan,
payments for shareholder services and administrative services may not exceed
0.25% and 0.75%, respectively, of the average daily net assets of each Fund's K
Shares. The total of all payments under the Distribution Plan and the
Administrative Plan may not exceed, in the aggregate, the annual rate of 1.00%
of the average daily net assets of each Fund's K Shares. For the six months
ended August 31, 1997, the U.S. Government Securities Fund, Corporate Bond Fund
and Intermediate Bond Fund incurred charges of $600, $294 and $465,
respectively, pursuant to the Administrative Plan. For the six months ended
August 31, 1997, $609, $235 and $351 of shareholder services and administrative
services were waived by the U.S. Government Securities Fund, Corporate Bond Fund
and Intermediate Bond Fund, respectively.
The Intermediate Bond Fund has a Shareholder Services Plan under which the
Fund pays the Distributor for shareholder
27
<PAGE> 30
servicing expenses incurred in connection with the SRF Shares. Under the
Services Plan, payments for shareholder servicing expenses may not exceed 0.25%
of the Fund's average daily net assets for SRF Shares. For the six months ended
August 31, 1997, Intermediate Bond Fund incurred charges of $17,401, pursuant to
the Services Plan. For the same period $5,772 shareholder servicing fees were
waived by the Intermediate Bond Fund.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $62,588, $22,133, and $22,010 from the
U.S. Government Securities Fund, Corporate Bond Fund, and Intermediate Bond
Fund, respectively, for the six months ended August 31, 1997.
For the six months ended August 31, 1997, the U.S. Government Securities
Fund, Corporate Bond Fund, and Intermediate Bond Fund incurred legal charges
totaling $3,220, $572, and $718, respectively, which were earned by a law firm,
a partner of which serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. In addition, the
amount payable each year to a Director who dies or resigns shall be increased by
$1,000 for each year of service that the Director served as Chairman of the
Board. Each Director may receive any benefits payable under the Retirement Plan,
at his or her election, either in one lump sum payment or ten annual
installments. A Director's years of service for the purpose of calculating the
payments described above shall be based upon service as a Director or Chairman
after February 28, 1994. Aggregate costs pursuant to the Retirement Plan
amounted to $510
28
<PAGE> 31
and $70 for the U.S. Government Securities
Fund and Intermediate Bond Fund, respectively, for the six months ended August
31, 1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of U.S. Government Securities Fund portfolio securities
(excluding short-term investments) amounted to $- and $6,600,142, respectively.
The cost of purchases and the proceeds from sales of Corporate Bond Fund
portfolio securities (excluding short-term investments) amounted to $16,011,333
and $11,688,577, respectively.
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Funds are summarized below:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued....... 612 $ 5,627 909 $ 8,426
Reinvested... 179 1,657 394 3,657
Redeemed..... (975) (8,995) (2,780) (25,808)
------- --------- ------ --------
Net
decrease..... (184) $ (1,711) (1,477) $(13,725)
======= ========= ====== ========
K Shares
Issued....... 25,378 $ 237,759 44,725 $420,128
Reinvested... 1,474 13,735 244 2,282
Redeemed..... (6,198) (57,663) (50) (465)
------- --------- ------ --------
Net
increase..... 20,654 $ 193,831 44,919(a) $421,945(a)
======= ========= ====== ========
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BOND FUND
--------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------
<S> <C> <C> <C> <C>
A Shares
(000's)
Issued....... 485 $ 7,646 549 $ 8,657
Reinvested... 26 411 40 622
Redeemed..... (305) (4,822) (525) (8,251)
------- --------- ------ --------
Net
increase..... 206 $ 3,235 64 $ 1,028
======= ========= ====== ========
K Shares
Issued....... 1,944 $ 30,782 14,923 $238,773
Reinvested... 490 7,748 135 2,144
Redeemed..... (1,760) (26,691) (35) (561)
------- --------- ------ --------
Net
increase..... 674 $ 11,839 15,023(a) $240,356(a)
======= ========= ====== ========
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
--------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------
<S> <C> <C> <C> <C>
A Shares
(000's)
Issued....... 1,838 $ 17,554 1,730 $ 16,588
Reinvested... 25 242 51 485
Redeemed..... (588) (5,619) (728) (6,976)
------- --------- ------ --------
Net
increase..... 1,275 $ 12,177 1,053 $ 10,097
======= ========= ====== ========
K Shares
Issued....... 23,969 $ 228,806 34,567 $329,738
Reinvested... 1,022 11,043 285 2,728
Redeemed..... (16,562) (158,684) (1) (1)
------- --------- ------ --------
Net
increase..... 8,429 $ 81,165 34,851(a) $332,465(a)
======= ========= ====== ========
SRF Shares
(000's)(b)
Issued....... 3,483 $ 39,843 -- $ --
Reinvested... 35 380 -- --
Redeemed..... (159) (1,718) -- --
------- --------- ------ --------
Net
increase..... 3,359 $ 38,505 -- $ --
======= ========= ====== ========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
29
<PAGE> 32
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(b) 1996 1995 1994
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF PERIOD........................... $ 9.30 $ 9.43 $ 9.31 $ 9.85 $ 10.21
------- ------- ------- ------- --------
Income from Investment Operations:
Net investment income............... 0.32 0.59 0.61 0.55 0.45
Net realized and unrealized gains
losses on investment
transactions...................... 0.10 (0.12) 0.16 (0.54) (0.11)
------- ------- ------- ------- --------
Total income from investment
operations.......................... 0.42 0.47 0.77 0.01 0.34
------- ------- ------- ------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income................. (0.31) (0.59) (0.61) (0.52) (0.45)
Dividends to shareholders from net
realized gains on investment
transactions...................... -- -- (0.01) -- (0.16)
Tax return of capital............... -- (0.01) (0.03) (0.03) (0.09)
------- ------- ------- ------- --------
Total Dividends and Distributions:... (0.31) (0.60) (0.65) (0.55) (0.70)
------- ------- ------- ------- --------
Net change in net asset value per
share............................... 0.11 (0.13) 0.12 (0.54) (0.36)
------- ------- ------- ------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD.............................. $ 9.41 $ 9.30 $ 9.43 $ 9.31 $ 9.85
======= ======= ======= ======= ========
Total return (excludes sales
charge)............................. 4.58%(c) 5.23% 8.47% 0.30% 3.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)... $ 73,068 $ 74,485 $ 89,491 $ 87,354 $157,984
Ratio of expenses to average net
assets............................ 0.85%(d) 0.85% 1.15% 1.15% 0.96%
Ratio of net investment income to
average net assets................ 6.28%(d) 6.11% 6.36% 5.57% 4.45%
Ratio of expenses to average net
assets*........................... 1.30%(d) 1.25%** 1.26%** (a) 1.00%
Ratio of net investment income to
average net assets*............... 6.28%(d) 5.71% 6.28% (a) 4.41%
Portfolio turnover rate***.......... 0% 94% 137% 189% 255%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the
Portfolio received credits from its custodian for interest earned on
uninvested balances which were used to offset custodian fees and expenses.
If such credits had not occurred, the expense ratios would have been as
indicated. The ratio of net investment income was not affected.
*** Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(a) There were no fee waivers or expense reimbursements during the period.
(b) As of July 22, 1996, the Portfolio desiginated the existing series of
shares as "A" Shares.
(c) Not annualized.
(d) Annualized.
See Notes to Financial Statements.
30
<PAGE> 33
PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
---------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD............................. $ 9.30 $ 9.22
------ ------
Income from Investment Operations:
Net investment income..................................................... 0.30 0.35
Net realized and unrealized gains on investment transactions.............. 0.10 0.08
------ ------
Total income from investment operations.................................... 0.40 0.43
------ ------
Less dividends to shareholders from net investment income.................. (0.29) (0.35)
------ ------
Net change in net asset value per share.................................... 0.11 0.08
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD................................... $ 9.41 9.30
====== ======
Total return............................................................... 4.35%(b) 4.75%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)......................................... $ 485 $ 418
Ratio of expenses to average net assets................................... 1.34%(c) 1.35%(c)
Ratio of net investment income to average net assets...................... 5.78%(c) 6.11%(c)
Ratio of expenses to average net assets*.................................. 2.04%(c) 2.06%(c)
Ratio of net investment income to average net assets*..................... 5.78%(c) 5.73%(c)
Portfolio turnover rate***................................................. 0% 94%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions
and/or reimbursements had not occurred, the ratios would have been as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the Portfolio received credits from its
custodian for interest earned on uninvested balances which were used to offset custodian fees and expenses.
If such credits had not occurred, the expense ratios would have been as indicated. The ratio of net
investment income was not affected.
*** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Not annualized.
(c) Annualized.
</TABLE>
See notes to financial statements.
31
<PAGE> 34
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
PERIOD
SIX MONTHS OCTOBER 1,
ENDED YEAR ENDED 1994
AUGUST 31, ------------------------------ THROUGH
1997 FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996(a) 1995
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR............................. $ 15.79 $ 16.09 $ 15.03 $ 14.86
-------- -------- -------- --------
Income from Investment Operations:
Net investment income............... 0.50 0.93 0.98 0.45
Net realized and unrealized gains
(losses) on investment
transactions...................... 0.18 (0.30) 1.11 0.17
-------- -------- -------- --------
Total income (loss) from investment
operations.......................... 0.68 0.63 2.09 0.62
-------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income................. (0.50) (0.93) (0.98) (0.45)
Distributions to shareholders from
net realized gains on investment
transactions...................... 0.00 -- (0.05) --
-------- -------- -------- --------
Total Dividends and Distributions.... (0.50) (0.93) (1.03) (0.45)
-------- -------- -------- --------
Net change in net asset value per
share............................... 0.18 (0.30) 1.06 0.17
-------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD.............................. $ 15.97 $ 15.79 $ 16.09 $ 15.03
======== ======== ======== ========
Total return (excludes sales
charge)............................. 4.38%(e) 4.13% 14.12% 4.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)... $ 36,465 $32,842 $32,387 $31,372
Ratio of expenses to average net
assets*........................... 0.92%(d) 1.27% 1.33% 1.04%(d)
Ratio of net investment income to
average net assets*............... 6.29%(d) 6.01% 6.12% 7.32%(d)
Portfolio turnover rate**........... 35% 59% N/A N/A
</TABLE>
- ---------------
* Reflects the Fund's proportionate share of the Portfolio's expenses and fee
waivers and expense reimbursements by the Portfolio's Investment Advisor and
Administrator and the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursement 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 0.75% (annualized) for six months ended August 31, 1997
and 0.61% for the period ended February 29, 1997 and 0.90% (annualized) for
the periods ended February 29, 1996 and February 28, 1995 and 0.16% for the
period ended February 28, 1994, respectively.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) As of July 22, 1996, the Portfolio designated the existing series of shares
as "A" Shares.
(b) Includes the results of operations of Bunker Hill Income Securities, Inc.
and the Fund.
(c) The financial highlights for the years ended September 30, 1993 and 1992 are
for the Bunker Hill Income Securities Inc., a closed end fund.
(d) Annualized.
(e) Not annualized.
See Notes to Financial Statements.
32
<PAGE> 35
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994(b) 1993(c) 1992(c)
-------------- -------------- --------------
<S> <C> <C> <C>
$ 16.94 $ 16.12 $ 15.22
-------- -------- --------
1.58 1.34 1.48
(2.06) 0.82 0.95
-------- -------- --------
(0.48) 2.16 2.43
-------- -------- --------
(1.58) (1.34) (1.53)
(0.02) -- --
-------- -------- --------
(1.60) (1.34) (1.53)
-------- -------- --------
(2.08) 0.82 0.90
-------- -------- --------
$ 14.86 $ 16.94 $ 16.12
======== ======== ========
(2.29%) 7.05% 13.36%
$ 33,046 $ 46,999 $ 44,642
0.91% 1.02% 1.09%
7.85% 8.14% 9.42%
N/A 154.34% 251.97%
</TABLE>
33
<PAGE> 36
PACIFIC HORIZON CORPORATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (a)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD............................... $ 15.80 $15.56
------ ------
Income from Investment Operations:
Net investment income........................................................ 0.46 0.53
Net realized and unrealized gains on investment transactions................ 0.17 0.24
------ ------
Total income from investment operations...................................... 0.63 0.77
------ ------
Less Dividends and Distributions:
Dividends to shareholders from net investment income........................ (0.46) (0.53)
Distributions to shareholders from net realized gains on investment
transactions.............................................................. -- --
------ ------
Total Dividends and Distributions............................................ (0.46) (0.53)
------ ------
Net change in net asset value per share...................................... 0.17 0.24
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD..................................... $ 15.97 $15.80
====== ======
Total return................................................................. 4.03%(b) 5.01%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)........................................... $ 252 $ 237
Ratio of expenses to average net assets..................................... 1.47%(c) 1.64%
Ratio of net investment income to average net assets........................ 5.74%(c) 5.60%
Ratio of expenses to average net assets*.................................... 2.17%(c) 2.25%
Ratio of net investment income to average net assets*....................... 5.04%(c) (4.99%)
Portfolio turnover rate**................................................... 35% 59%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
34
<PAGE> 37
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD
AUGUST 31, ------------------------------------------ ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(b) 1996 1995 1994(a)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR....... $ 9.54 $ 9.75 $ 9.44 $ 9.81 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income............................. 0.24 0.52 0.59 0.59 0.08
Net realized and unrealized gain (loss) on
investment transactions......................... 0.09 (0.15) 0.33 (0.37) (0.19)
-------- -------- -------- -------- --------
Total income (loss) from investment operations..... 0.33 0.37 0.92 0.22 (0.11)
-------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income.......................................... (0.24) (0.52) (0.59) (0.59) (0.08)
Dividends to shareholders from net realized gains
on investment transactions...................... (0.03) (0.06) (0.02) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions.................. (0.27) (0.58) (0.61) (0.59) (0.08)
-------- -------- -------- -------- --------
Net change in net asset value per share............ 0.06 (0.21) 0.31 (0.37) (0.19)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD........... $ 9.60 $ 9.54 $ 9.75 $ 9.44 $ 9.81
======== ======== ======== ======== ========
Total return (excludes sales charge)............... 3.52%++ 3.92% 10.45% 2.27% (1.10%)++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)................. $ 35,306 $ 22,937 $ 13,179 $ 1,964 $ 356
Ratio of expenses to average net assets........... 0.83%+ 0.75% 0.27% 0.00% 0.00%+
Ratio of net investment income to average net
assets.......................................... 5.62%+ 5.45% 6.13% 6.43% 5.70%+
Ratio of expenses to average net assets*.......... 1.16%+ 2.26% 5.00% 17.95% 160.20%+
Ratio of net investment income (loss) to average
net assets*..................................... 5.29%+ 3.94% 1.40% (11.52%) (154.50%)+
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
+ Annualized.
++ Not Annualized.
(a) Period from January 13, 1994 (inception date) to February 28, 1994.
(b) As of July 22, 1996 the Fund designated the existing series of shares as "A"
shares.
See Notes to Financial Statements.
35
<PAGE> 38
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
AUGUST 31, ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (a)
-------------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR........................... $ 9.54 $ 9.53
------ ------
Income from Investment Operations:
Net investment income................................................. 0.22 0.31
Net realized and unrealized gain on investments....................... 0.08 0.07
------ ------
Total income from investment operations............................... 0.30 0.38
------ ------
Less Dividends and Distributions:
Dividends to shareholders from net investment income.................. (0.22) (0.31)
Distributions to shareholders from net realized gains on
investments......................................................... (0.03) (0.06)
------ ------
Total Dividends and Distributions...................................... (0.25) (0.37)
------ ------
Net change in net asset value per share................................ 0.05 0.01
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD............................... $ 9.59 $ 9.54
====== ======
Total return........................................................... 3.16%(c) 3.73%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)..................................... $ 415 $ 332
Ratio of expenses to average net assets............................... 1.32%(b) 1.43%(b)
Ratio of net investment income to average net assets.................. 5.12%(b) 5.41%(b)
Ratio of expenses to average net assets*.............................. 1.66%(b) 2.71%(b)
Ratio of net investment income to average net assets*................. 4.78%(b) 4.13%(b)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Annualized.
(c) Non annualized.
See Notes to Financial Statements.
36
<PAGE> 39
[THIS PAGE LEFT INTENTIONALLY BLANK]
37
<PAGE> 40
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
--------------------------
JUNE 23, MARCH 1,
1997 THROUGH 1997 THROUGH YEAR ENDED
AUGUST 31, JUNE 22, ----------------------------------------
1997 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR............... $10.73 $10.70 $10.87 $10.48 $11.00
------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income........... 0.12 0.15 0.57 0.64 0.61
Net realized and unrealized
gain(loss) on investment
transactions.................. -- 0.08 (0.18) 0.39 (0.46)
------ ------ ------ ------ ------
Total income (loss) from
investment operations........... 0.12 0.23 0.39 1.03 0.15
Less Dividends and Distributions:
Dividends to shareholders from
net investment income......... (0.11) (0.16) (0.56) (0.64) (0.61)
Distributions to shareholders
from net realized gains....... -- (0.04) -- -- (0.06)
------ ------ ------ ------ ------
Total Dividends and
Distributions................... (0.11) (0.20) (0.56) (0.64) (0.67)
------ ------ ------ ------ ------
Net change in net asset value per
share........................... 0.01 0.03 (0.17) 0.39 (0.52)
------ ------ ------ ------ ------
NET ASSET VALUE PER SHARE, END OF
PERIOD.......................... $10.74 $10.73 $10.70 $10.87 $10.48
====== ====== ====== ====== ======
Total Return..................... 3.31%++ 2.04%++ 3.74% 9.90% 1.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions).................... $ 36 $ 37 $ 39 $ 47 $ 56
Ratio of expenses to average net
assets........................ 0.95%+ 0.94% 0.95% 0.95% 0.83%
Ratio of net investment income
(loss) to average net
assets........................ 5.62%+ 5.41% 5.21% 5.74% 5.64%
Ratio of expenses to average net
assets*....................... 1.20%+ 1.55% 1.45% 1.56% 1.41%
Ratio of net investment income
to average net assets*........ 5.37%+ 4.80% 4.71% 5.13% 5.06%
Portfolio turnover rate......... 59% N/A N/A N/A N/A
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
++ Not Annualized.
+ Annualized.
(a) Represents activity of the Fund prior to its reorganization from the
Intermediate Bond Fund of Collective Investment Trust for Severest
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.
See Notes to Financial Statements.
38
<PAGE> 41
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-----------------------------
DECEMBER 6, JANUARY 1,
1993 THROUGH 1993 THROUGH YEAR ENDED
FEBRUARY 28, DECEMBER 5, DECEMBER 31,
1994 1993(a) 1992(a)
------------ ------------ ------------
<S> <C> <C> <C>
$11.14 $10.99 $11.01
------ ------ ------
0.12 0.58 0.67
(0.14) 0.15 (0.02)
------ ------ ------
(0.02) 0.73 0.65
(0.12) (0.58) (0.67)
-- -- --
------ ------ ------
(0.12) (0.58) (0.67)
------ ------ ------
(0.14) 0.15 (0.02)
------ ------ ------
$11.00 $11.14 $10.99
====== ====== ======
(0.23)%++ 6.80%++ 6.04%
$ 77 $ 83 $ 74
0.95%+ 0.95%+ 0.95%
4.38%+ 5.60%+ 6.15%
1.79%+ 0.95%+ 0.95%
3.54%+ 5.60%+ 6.15%
N/A 95% 154%
</TABLE>
39
<PAGE> 42
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
S&P/MOODY'S MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ------------- ----- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- 12.8%
AESOP Funding II Series 1997-I, Class
A1................................... Aaa/AAA 6.22% 10/20/01 $2,000,000 $ 1,997,813
Citibank Credit Card Master Trust I
(ZCB)................................ Aaa/AAA 0.00% 08/15/06 2,000,000 1,247,730
Contimortgage Home Equity Loan........ AAA/Aaa 6.60% 10/15/11 2,000,000 1,984,562
Contimortgage Home Equity Loan Trust
1997-3 A5............................ AAA/Aaa 7.01% 08/15/13 2,000,000 2,015,625
Standard Credit Card Master Trust
Series 1995-3, Class A............... AAA/Aaa 7.85% 02/07/02 2,500,000 2.590,613
The Money Store Home Equity Trust
Series 1996-B........................ AAA/Aaa 7.38% 05/15/17 1,000,000 1,019,222
The Money Store, Series 1997-B A5..... AAA/Aaa 6.83% 07/15/21 2,500,000 2,507,055
World Omni Automobile Lease
Securitization Trust, Series 1997-A,
Class A4............................. AAA/Aaa 6.90% 06/25/03 2,250,000 2,280,803
-----------
TOTAL ASSET BACKED SECURITIES (COST $15,684,499) 15,643,623
-----------
CORPORATE BONDS -- 28.2%
Aetna Services Inc.................... A2/A 6.76% 08/15/01 5,500,000 5,534,375
Bear Steams Co........................ A2/A 6.50% 07/05/00 2,000,000 2,002,500
Finova Capital Corp................... Baa 1/A- 6.63% 09/15/01 3,500,000 3,482,500
Ford Motor Credit Co.................. A1/A+ 5.75% 01/25/01 2,000,000 1,955,000
General Motors Acceptance Corp........ A3/A- 7.13% 05/01/01 3,950,000 4,014,187
General Motors Acceptance Corp........ A3/A- 6.88% 07/15/01 2,000,000 2,017,500
Hartford Life, Inc.................... A2/A 6.90% 06/15/04 3,000,000 3,003,750
International Lease Finance Corp...... A1/A+ 6.88% 05/01/01 4,000,000 4,040,000
Merrill Lynch & Co., Inc.............. Aa3/AA- 6.00% 01/15/01 2,000,000 1,970,000
Morgan Stanley Debentures............. A1/A+ 9.38% 06/15/01 4,165,000 4,550,263
Waste Management Inc.................. A3/A- 6.63% 07/15/02 2,000,000 1,990,000
-----------
TOTAL CORPORATE BONDS (COST $34,296,226) 34,560,075
-----------
MEDIUM TERM NOTES -- 19.5%
Associates Corp. of North America
Underwritten Senior Notes............ Aa3/AA- 6.75% 07/15/01 4,100,000 4,125,625
Fuji Bank............................. A3/NR 7.30% 03/29/49 3,000,000 3,018,217
Ikon Capital Inc...................... A3/A- 6.73% 06/15/01 2,500,000 2,503,125
McDonnel Douglas Financial Corp....... A2/AA 6.83% 05/21/01 4,000,000 4,035,000
NationsBank Corp...................... A1/A+ 6.09% 12/14/01 5,000,000 4,887,500
Paine Webber Group, Series C.......... Baa1/BBB+ 7.31% 08/09/00 3,000,000 3,048,750
Sears Roebuck Acceptance Corp......... A2/A- 7.00% 06/15/07 2,200,000 2,202,750
-----------
TOTAL MEDIUM TERM NOTES (COST $23,734,148) 23,820,967
-----------
</TABLE>
See Notes to Financial Statements.
40
<PAGE> 43
<TABLE>
<CAPTION>
MATUITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ----- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.7%
Federal Home Loan Mortgage Corp. Pool
#160034.............................. 8.50% 12/01/07 $ 56,471 $ 59,418
Federal Home Loan Mortgage Corp. Pool
#284343.............................. 8.00% 12/01/16 7,863 8,141
Federal Home Loan Mortgage Corp. Pool
#297505.............................. 8.00% 06/01/17 17,628 18,349
Federal Home Loan Mortgage Corp. Pool
#549837.............................. 8.00% 07/01/10 173,389 180,433
Federal Home Loan Mortgage Corp.
Series #1501 Class G................. 6.40% 05/15/18 2,300,000 2,288,621
Federal National Mortgage Association
Pool #131579......................... 6.50% 07/01/04 114,533 110,489
Federal National Mortgage Association
Pool #286087......................... 9.00% 06/01/24 675,990 697,748
Fncx ppl #303528...................... 6.00% 06/01/01 1,963,425 1,921,089
Government National Mortgage
Association Pool #136688............. 10.00% 09/15/15 25,611 28,432
Government National Mortgage
Association Pool #166744............. 10.00% 07/15/16 258,911 285,207
Government National Association Pool
#209480.............................. 10.00% 07/15/17 78,783 86,785
Government National Mortgage
Association Pool #227082............. 10.00% 08/15/17 111,361 122,671
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.......................... 5,807,383
-----------
U.S. TREASURY OBLIGATIONS -- 32.5%
U.S. Treasury Notes................... 7.75% 01/31/00 18,500,000 19,195,043
U.S. Treasury Notes................... 5.63% 02/28/01 2,700,000 2,656,044
U.S. Treasury Notes................... 5.88% 06/30/00 10,000,000 9,948,999
U.S. Treasury Notes................... 7.00% 07/15/06 7,705,453 7,947,062
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$38,022,147)......................... 39,747,148
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
----------
<S> <C> <C> <C> <C> <C>
TEMPORARY INVESTMENTS -- 2.4%
Temporary Investment Cash Fund........ $1,458,382 $ 1,458,382
Temporary Investment Fund............. 1,466,382 1,466,382
-----------
TOTAL TEMPORARY INVESTMENTS (COST $2,924,766) 2,924,764
-----------
TOTAL INVESTMENTS -- 100.1% (COST $121,839,254)(a) 122,504,493
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1)% (166,158)
-----------
NET ASSETS -- 100.0%.................. $122,338,335
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $122,338,335.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................................... $ 843,444
Unrealized depreciation...................................................... (178,205)
----------
Net unrealized depreciation.................................................. $ 665,239
===========
</TABLE>
(ZCB) Zero Coupon Bond
See Notes to Financial Statements.
41
<PAGE> 44
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $121,839,254)............. $122,504,493
Receivable for securities sold...................................... 2,672,703
Contribution receivable............................................. 297,651
Interest receivable................................................. 1,428,852
Deferred organization costs......................................... 17,243
Prepaid expenses.................................................... 12,014
------------
Total Assets.......................................................... 126,932,956
------------
LIABILITIES:
Withdrawal payable.................................................. 385,769
Payable for securities purchased.................................... 4,122,829
Advisory fees payable............................................... 15,191
Audit fees payable.................................................. 30,315
Fund accounting fees payable........................................ 10,020
Legal fees payable.................................................. 5,989
Administration fees payable......................................... 2,270
Other accrued expenses.............................................. 22,238
------------
Total Liabilities..................................................... 4,594,621
------------
NET ASSETS............................................................ $122,338,335
============
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 45
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest Income........................................................ $4,552,804
----------
EXPENSES:
Advisory fees.......................................................... 279,369
Administration fees.................................................... 35,656
Fund accounting fees and expenses...................................... 54,032
Amortization of organization costs..................................... 6,992
Audit fees............................................................. 16,650
Legal fees............................................................. 6,655
Directors fees......................................................... 3,566
Other operating expenses............................................... 10,017
----------
Total Expenses................................................... 412,937
Less: Fee waivers and reimbursements..................................... (156,639)
----------
Total Net Expenses....................................................... 256,298
----------
NET INVESTMENT INCOME.................................................... 4,296,506
----------
REALIZED/UNREALIZED (LOSSES) ON INVESTMENTS FROM MASTER INVESTMENT TRUST,
SERIES I -- INVESTMENT GRADE BOND PORTFOLIO:
Net realized losses on investment transactions......................... (405,757)
Net change in unrealized depreciation on investments................... 1,294,579
----------
Net realized / unrealized losses on investments........................ 888,822
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $5,185,328
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 46
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................. $ 4,296,506 $ 5,575,868
Net realized gain (loss) on investment
transactions.................................... (405,757) (535,492)
Net change in unrealized depreciation on
investments..................................... 1,294,579 (681,210)
------------ ------------
Change in net assets resulting from operations.... 5,185,328 4,359,166
------------ ------------
TRUST SHARE TRANSACTIONS:
Contributions..................................... 27,755,852 94,643,822
Withdrawals....................................... (49,759,764) (26,135,644)
------------ ------------
Change in net assets resulting from trust share
transactions...................................... (22,003,912) 68,508,178
------------ ------------
Change in net assets................................ (16,818,584) 72,867,344
NET ASSETS
Beginning of Period............................... 139,156,919 66,289,575
------------ ------------
End of Period..................................... $122,338,335 $ 139,156,919
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 47
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
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 August 31, 1997, the Trust
consisted of two portfolios. The accompanying financial statements and notes are
those of the Investment Grade Bond Portfolio (the "Portfolio") only.
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 term bonds, including corporate and governmental fixed
income obligations and mortgage-backed securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Portfolio's investment
adviser. The BISYS Group, Inc. through its wholly owned subsidiary, BISYS Fund
Services, Limited Partnership ("BISYS") served as the Portfolio's administrator
thru September 15, 1997. Effective September 15, 1997, PFPC Inc., an indirect
wholly-owned subsidiary of PNC Bank Corp. serves as administrator for the Trust.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the 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 in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
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 securities exchange on which such securities
are primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. The Portfolio may use an
independent pricing service, approved by the Board of Trustees, to value certain
of their securities. Such prices reflect market values which may be established
through the use of electronic
45
<PAGE> 48
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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses on securities transactions are determined on
the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
FEDERAL INCOME TAXES:
The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be taxed on their share
of that Portfolio's ordinary income and capital gains. It is intended that the
Portfolio 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.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has an Investment Advisory Agreement with Bank of America and
an Administration Agreement with BISYS thru September 15, 1997.
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 Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, accrued daily and paid monthly,
at an annual rate of 0.45% from March 1, 1997 through June 22, 1997, and 0.30%
from June 23, 1997 through August 31, 1997 of the average daily net assets of
the Portfolio. For the six months ended August 31, 1997, Bank of America waived
$140,896 in fees as Adviser of the Portfolio.
As Administrator, BISYS assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, BISYS was
entitled to a fee which is accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the six months ended
August 31, 1997, BISYS waived $15,473 in fees as Administrator of the Portfolio.
For services provided to two of the portfolios constituting the Trust, each
Trustee receives an annual fee of $3,000 and a meeting fee of $500 per meeting.
For the six months ended August 31, 1997, the Investment Grade Bond
Portfolio incurred legal expenses of $6,655, which
46
<PAGE> 49
was earned by a law firm, a partner of which serves as Secretary of the Trust.
Certain officers of the Trust are affiliated with BISYS. Such persons are
not paid directly by the Trust for serving in these capacities.
NOTE 4 -- SECURITIES TRANSACTIONS
During the six months ended August 31, 1997, the Portfolio purchased and
sold portfolio securities, excluding short-term securities, in the following
amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
U.S. Government..... $48,542,025 $14,952,580
Other............... 30,379,434 80,454,007
----------- -----------
Total............... $78,921,459 $95,406,587
=========== ===========
</TABLE>
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Investment Grade Bond Portfolio had the following concentrations by
industry sector at August 31, 1997 (as a percentage of total investments):
<TABLE>
<S> <C>
Asset-Backed Securities............. 12.8
Corporate Bonds..................... 28.2
Medium Term Notes................... 19.5
Temporary Investments............... 2.4
U.S. Government Agency
Obligations........................ 4.7
U.S. Treasury Notes................. 32.4
-----
100.0%
=====
</TABLE>
47
<PAGE> 50
MASTER INVESTMENT TRUST SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX YEAR ENDED
MONTHS ENDED ------------------------------------------------------------
AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994*
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 0.36%** 0.35% 0.18% 0.25% 0.41%**
Ratio of net
investment income to
average net assets... 6.03%** 5.86% 6.47% 6.22% 4.93%**
Ratio of expenses to
average net
assets(a)............ 0.58%** 0.65% 0.68% 0.75% 0.91%**
Ratio of net
investment income to
average net
assets(a)............ 5.81%** 5.56% 5.97% 5.72% 4.43%**
Portfolio Turnover.... 59% 83% 172% 240% 32%
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
* For the period December 6, 1993 (commencement of operations) through February
28, 1994.
** Annualized.
48
<PAGE> 51
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 52
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
[PACIFIC HORIZON LOGO]
Provident Distributor, Inc., Distributor
TFI-0011 10/97
<PAGE> 53
PACIFIC HORIZON GROWTH FUNDS
SEMI-ANNUAL REPORT
August 31, 1997
Aggressive Growth Fund
Blue Chip Fund
Investing For All
The Times Of Your Life
NOT FDIC INSURED
PACIFIC HORIZON GROWTH FUNDS
<PAGE> 54
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 55
CONTENTS
<TABLE>
<S> <C>
.
. FUND FACTS 2-3
.
. UNDERSTANDING YOUR SHAREHOLDER
. REPORT 4-6
.
. ECONOMIC REVIEW FROM THE INVESTMENT
. ADVISER 8-9
.
. PACIFIC HORIZON AGGRESSIVE GROWTH
. FUND
. Portfolio of Investments 10-13
. Statement of Assets
. and Liabilities 14
. Statement of Operations 15
. Statements of Changes
. in Net Assets 16
.
. PACIFIC HORIZON BLUE CHIP FUND
. Statement of Assets
. and Liabilities 17
. Statement of Operations 18
. Statements of Changes
. in Net Assets 19
. NOTES TO FINANCIAL STATEMENTS 20-27
.
. FINANCIAL HIGHLIGHTS 28-32
.
. MASTER INVESTMENT TRUST, SERIES
. I -- BLUE CHIP PORTFOLIO
. Portfolio of Investments 33-36
. Statement of Assets
. and Liabilities 37
. Statement of Operations 38
. Statements of Changes
. in Net Assets 39
. Notes to Financial Statements 40-42
. Supplementary Data 43
</TABLE>
<PAGE> 56
PACIFIC HORIZON FUND FACTS
The Pacific Horizon Family of Funds offers a variety of mutual funds with
different investment objectives to help you diversify your portfolio and meet
your investment goals. Some Funds offer greater growth potential, while others,
the money market funds, strive to maintain a stable net asset value but offer no
growth potential.
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------
<S> <C>
International Equity Long-Term Capital Growth
.....................................................................................
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Intermediate Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
Short-Term Government High Current Income with Relative
Stability of Principal
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>
- --------------------------------------------------------------------------------
* Certain investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.
2
<PAGE> 57
With the help of an investment professional, you can develop a strategy tailored
to meet your goals. To receive any of the Funds' prospectuses, which include
more complete information such as charges and expenses, call your investment
specialist or the Pacific Horizon Funds. Read the prospectus carefully before
investing or sending money.
<TABLE>
<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Foreign Equity Securities Diversification into foreign equity markets with
associated risk.
................................................................................................
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
U.S. Government and Government Agency Monthly income and relative stability of investment.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 58
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.
The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[SAMPLE PAGE GRAPHIC]
4
<PAGE> 59
The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[SAMPLE PAGE GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE
The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[SAMPLE PAGE GRAPHIC] SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
5
<PAGE> 60
The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.
ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
[SAMPLE PAGE GRAPHIC]
The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENT OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
[SAMPLE PAGE GRAPHIC]
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.
The FINANCIAL HIGHLIGHTS shows, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.
6
<PAGE> 61
THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE> 62
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
8
<PAGE> 63
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
9
<PAGE> 64
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ----------------------------------------------------------------------- -------- ------------
<S> <C> <C>
COMMON STOCK -- 97.3%
AEROSPACE/DEFENSE -- EQUIPMENT -- 3.3%
BE Aerospace, Inc.*................................................... 72,750 $ 2,582,625
REMEC, Inc.*.......................................................... 134,050 4,473,919
------------
7,056,544
------------
AGRICULTURAL OPERATIONS -- 1.6%
Northland Cranberries, Inc. .......................................... 204,000 3,493,500
------------
AIRLINES -- 1.7%
Airways Corp.*........................................................ 112,500 597,656
Mesaba Holdings, Inc.*................................................ 156,600 3,073,275
------------
3,670,931
------------
BIOTECHNOLOGY -- 3.0%
Genome Therapeutics Corp.*............................................ 149,700 1,188,244
Human Genome Sciences, Inc.*.......................................... 44,300 1,650,175
Protein Design Labs, Inc.*............................................ 100,000 3,562,500
------------
6,400,919
------------
BROADCASTING -- 3.0%
All American Communications, Inc.*.................................... 174,600 2,444,400
Cablevision Systems Corp.*............................................ 31,350 1,573,378
United International Holdings, Inc.*.................................. 228,250 2,439,422
------------
6,457,200
------------
BUILDING AND HOME FURNISHINGS -- 1.4%
Advanced Lighting Technologies, Inc.*................................. 120,750 2,898,000
------------
BUSINESS SERVICES -- 3.4%
Accustaff, Inc.*...................................................... 126,450 3,358,828
Professional Staff PLC*............................................... 104,400 1,455,075
Select Appointments Holdings Public Limited Company ADR............... 135,500 2,439,000
------------
7,252,903
------------
CLOTHING & APPAREL -- 3.0%
Farah, Inc.*.......................................................... 153,000 1,195,312
Novel Denim Holdings Limited*......................................... 49,600 1,085,000
Quicksilver, Inc.*.................................................... 124,050 4,225,453
------------
6,505,765
------------
COMMERCIAL SERVICES -- 2.9%
NCO Group, Inc.*...................................................... 48,050 1,801,875
PMT Services, Inc.*................................................... 258,000 4,353,750
------------
6,155,625
------------
COMPUTERS -- PERIPHERAL EQUIPMENT -- 1.5%
Cybex Computer Products Corp.*........................................ 125,900 3,147,500
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
10
<PAGE> 65
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ----------------------------------------------------------------------- -------- ------------
<S> <C> <C>
COMPUTER SERVICES & SOFTWARE -- 5.5%
3D Labs, Inc., Ltd.*.................................................. 120,800 $ 4,786,700
Cimatron Ltd.*........................................................ 479,600 1,978,350
DataWorks Corp.*...................................................... 91,750 1,513,875
Rogue Wave Software, Inc.*............................................ 189,100 2,765,588
Spectrum HoloByte, Inc.*.............................................. 160,300 771,444
------------
11,815,957
------------
CONSUMER PRODUCTS & SERVICES -- 0.6%
Meade Instruments Corp.*.............................................. 166,300 1,268,037
------------
CONSUMER SERVICES -- OTHER -- 1.3%
Equity Corp. International*........................................... 120,000 2,767,500
------------
CONTAINERS AND PACKAGING -- 0.8%
Gaylord Container Corp.*.............................................. 179,600 1,694,975
------------
DIVERSIFIED OPERATIONS -- 1.9%
Volt Information Sciences, Inc.*...................................... 74,350 4,149,659
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 4.8%
Actel Corp.*.......................................................... 82,500 1,675,781
EMCORE Corp.*......................................................... 144,000 3,276,000
International Rectifier Corp.*........................................ 170,000 3,878,125
Ultrak, Inc.*......................................................... 135,200 1,428,050
------------
10,257,956
------------
ENTERTAINMENT & LEISURE -- 6.3%
Family Golf Centers, Inc.*............................................ 119,000 2,759,312
Galoob Toys, Inc.*.................................................... 142,500 2,956,875
Iwerks Entertainment, Inc.*........................................... 151,550 549,369
Sodak Gaming, Inc.*................................................... 102,100 1,391,113
WMS Industries, Inc.*................................................. 223,000 5,505,313
------------
13,161,982
------------
ENVIRONMENTAL SERVICES -- 3.3%
Air & Water Technologies Corp.*....................................... 461,000 1,383,000
Culligan Water Technologies, Inc.*.................................... 45,500 2,098,687
Osmonics, Inc.*....................................................... 71,500 1,215,500
TETRA Technologies, Inc.*............................................. 109,050 2,290,050
------------
6,987,237
------------
FINANCIAL SERVICES -- 4.4%
Consumer Portfolio Services, Inc.*.................................... 81,000 1,427,625
Imperial Credit Industries, Inc.*..................................... 185,200 3,449,350
SEI Investments Co. .................................................. 158,550 4,597,950
------------
9,474,925
------------
FOOD -- 0.7%
Unimark Group, Inc.*.................................................. 183,800 1,596,763
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 66
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ----------------------------------------------------------------------- -------- ------------
<S> <C> <C>
HEALTHCARE SERVICES -- 5.0%
Emeritus Corp.*....................................................... 148,150 $ 2,092,619
Envoy Corp.*.......................................................... 116,500 3,145,500
Orthodontic Centers of America, Inc.*................................. 103,000 1,763,875
ProMedeCo Management Co.*............................................. 67,400 471,800
SeaMED Corp.*......................................................... 187,000 3,272,500
------------
10,746,294
------------
HOUSEHOLD PRODUCTS -- 0.8%
Lifetime Hoan Corp.*.................................................. 226,600 1,756,150
------------
INSTRUMENTS -- CONTROLS -- 0.6%
Metrika Systems Corp.*................................................ 87,300 1,331,325
------------
MANUFACTURING -- 2.5%
Astrotech International Corp.*........................................ 123,600 1,390,500
ITEQ, Inc.*........................................................... 197,600 2,445,300
Memtec, Ltd. ......................................................... 72,750 1,445,906
------------
5,281,706
------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.0%
Endosonics Corp.*..................................................... 175,200 2,058,600
------------
METALS & MINING -- 1.9%
Titanium Metals Corp.*................................................ 111,450 3,984,338
------------
OIL & GAS -- 5.7%
Cairn Energy USA, Inc.*............................................... 179,000 2,047,312
Costilla Energy, Inc.*................................................ 189,500 1,942,375
Eagle Geophysical, Inc.*.............................................. 59,200 1,213,600
Eastern Enterprises................................................... 28,150 1,004,603
Ocean Energy, Inc. *.................................................. 45,000 2,894,062
United Meridian Corp.*................................................ 79,600 3,119,325
------------
12,221,277
------------
PHARMACEUTICALS -- 1.2%
Algos Pharmaceutical Corp.*........................................... 102,200 2,210,075
Kendle International Inc.*............................................ 25,000 400,000
SEQUUS Pharmaceuticals, Inc.*......................................... 350 2,362
------------
2,612,437
------------
RESTAURANTS -- 1.6%
Landry's Seafood Restaurants, Inc.*................................... 145,000 3,480,000
------------
RETAIL -- SPECIALTY STORES -- 4.6%
Petco Animal Supplies, Inc.*.......................................... 124,200 3,679,425
Stage Stores, Inc.*................................................... 104,150 3,222,141
The Wet Seal, Inc.*................................................... 145,350 3,161,363
------------
10,062,929
------------
RETAIL & MERCHANDISING -- 1.9%
Kennoth Cole Productions, Inc.*....................................... 178,500 2,465,531
RDO Equipment Co.*.................................................... 69,700 1,594,388
------------
4,059,919
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
12
<PAGE> 67
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ----------------------------------------------------------------------- -------- ------------
<S> <C> <C>
TELECOMMUNICATIONS -- SERVICES/EQUIPMENT -- 14.2%
ANTEC Corp.*.......................................................... 292,000 $ 3,942,000
Boston Communications Group, Inc.*.................................... 145,100 2,158,362
Brooks Fiber Properties, Inc.*........................................ 66,200 2,225,975
Gilat Satellite Networks, Ltd.*....................................... 113,950 3,703,375
Intermedia Communications, Inc.*...................................... 68,000 2,431,000
Iridium World Communications, Ltd.*................................... 108,450 3,890,644
LCC International, Inc.*.............................................. 80,550 1,449,900
NICE-Systems Ltd. ADR*................................................ 116,850 4,666,697
Ortel Corporation*.................................................... 139,400 3,293,325
Teledata Communications, Ltd.*........................................ 80,600 2,780,700
------------
30,541,978
------------
TRANSPORTATION -- COMMERCIAL SERVICES -- 1.3%
Budget Group, Inc.*................................................... 95,000 2,790,625
------------
WHOLESALE DISTRIBUTORS -- 0.6%
NuCo2, Inc.*.......................................................... 84,100 1,387,650
------------
TOTAL INVESTMENTS(A) -- 97.3% (COST $168,352,278)...................... 208,529,106
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.7%.......................... 5,877,977
------------
NET ASSETS -- 100.0%................................................... $214,407,083
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $214,407,083.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $ 51,792,321
Unrealized depreciation................................. (11,615,493)
------------
Net unrealized appreciation............................. $ 40,176,828
============
</TABLE>
* Non-income producing security.
ADR -- American Depositary Receipt.
See Notes to Financial Statements.
13
<PAGE> 68
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $168,352,278)............ $208,529,106
Cash............................................................... 6,710,472
Dividends Receivable............................................... 26,723
Receivable for investment securities sold.......................... 1,559,469
Receivable for capital shares sold................................. 127,153
Prepaid expenses................................................... 10,143
------------
Total Assets......................................................... 216,963,066
------------
LIABILITIES:
Payable for investment securities purchased........................ 1,261,219
Payable for capital shares redeemed................................ 902,471
Investment advisory fees payable................................... 107,955
Administration fees payable........................................ 53,977
Shareholder service fees payable (A and K Shares).................. 44,981
12b-1 fees payable (K Shares)...................................... 444
Transfer agent fees payable........................................ 139,853
Legal fees payable................................................. 5,519
Other accrued expenses............................................. 39,564
------------
Total Liabilities.................................................... 2,555,983
------------
NET ASSETS........................................................... $214,407,083
============
Net Assets
A Shares........................................................... $213,283,577
K Shares........................................................... 1,123,506
------------
Total................................................................ $214,407,083
------------
Shares Outstanding ($0.001 par value, 200 million shares authorized):
A Shares........................................................... 9,971,300
K Shares........................................................... 52,853
------------
Total................................................................ 10,024,153
============
NET ASSET VALUE:
A Shares -- redemption price per share............................. $21.39
======
Maximum Sales Charge (A Shares).................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge)).................................. $22.40
======
K Shares -- offering and redemption price per share................ $21.26
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par..................................... $ 10,024
Additional paid-in capital......................................... 182,177,783
Accumulated undistributed net investment income (loss)............. (1,263,592)
Accumulated net realized losses on investment transactions......... (6,693,960)
Net unrealized appreciation on investments......................... 40,176,828
------------
NET ASSETS, AUGUST 31, 1997.......................................... $214,407,083
============
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 69
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31. 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend............................................................ $ 103,222
Interest............................................................ 121,693
-----------
Total Income.......................................................... 224,915
-----------
EXPENSES:
Advisory fees....................................................... 596,019
Administration fees................................................. 298,009
Shareholder service fees (A Shares)................................. 247,405
Shareholder service fees (K Shares)................................. 936
12b-1 fees (K Shares)............................................... 2,807
Custodian and fund accounting fees.................................. 29,784
Transfer agent fees................................................. 220,714
Legal fees.......................................................... 8,260
Other expenses...................................................... 84,092
-----------
Total Expenses................................................ 1,488,026
Less: Fee waivers..................................................... (936)
-----------
Total Net Expenses.................................................... 1,487,090
-----------
NET INVESTMENT LOSS................................................... (1,262,175)
-----------
NET REALIZED/UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized loss on investment transactions........................ (5,865,048)
Net change in unrealized appreciation on investments................ 34,925,302
-----------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS.......................... 29,060,254
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $27,798,079
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 70
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment (losses)....................... $ (1,262,175) $ (2,598,857)
Net realized gains (losses) on investment
transactions................................ (5,865,048) 53,488,080
Net change in unrealized appreciation on
investments................................. 34,925,302 (30,785,939)
------------ ------------
Change in net assets resulting from
operations.................................. 27,798,079 20,103,284
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains from investment
transactions
A Shares................................ (9,411,755) (48,764,827)
K Shares................................ (40,112) (22,851)(a)
------------ ------------
Change in net assets from shareholder
distributions................................. (9,451,867) (48,787,678)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................... 80,555,793 554,405,607
Dividends reinvested.......................... 8,903,279 46,851,878
Cost of shares redeemed....................... (95,644,964) (550,673,264)
------------ ------------
Change in net assets from capital share
transactions.................................. (6,185,892) 50,584,221
------------ ------------
Change in net assets............................ 12,160,320 21,899,827
NET ASSETS:
Beginning of Period........................... 202,246,763 180,346,936
------------ ------------
End of Period (including undistributed net
investment losses of $1,263,592 and $1,417,
respectively.).............................. $214,407,083 $ 202,246,763
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
16
<PAGE> 71
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I -- Blue Chip
Portfolio, at value............................................. $538,657,972
Prepaid expenses.................................................. 35,671
------------
Total Assets........................................................ 538,693,643
------------
LIABILITIES:
Dividend payable.................................................. 4,020
Administration fees............................................... 69,781
Transfer agent fees payable....................................... 47,718
Shareholder service fees payable (A, K and SRF Shares)............ 55,144
Audit fees payable................................................ 12,242
Fund accounting fees and expense payable.......................... 11,919
Legal fees payable................................................ 18,438
Other accrued expenses............................................ 91,342
------------
Total Liabilities................................................... 310,604
------------
NET ASSETS.......................................................... $538,383,039
============
Net Assets
A Shares.......................................................... $216,029,073
K Shares.......................................................... 3,066,143
SRF Shares........................................................ 319,287,823
------------
Total............................................................... $538,383,039
============
Shares Outstanding ($0.001 par value, 300 million shares
authorized):
A Shares.......................................................... 8,002,386
K Shares.......................................................... 113,795
SRF Shares........................................................ 13,226,292
------------
Total............................................................... 21,342,473
============
NET ASSET VALUE:
A Shares -- redemption price per share............................ $27.00
======
Maximum Sales Charge (A Shares)................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge))................................. $28.27
======
K Shares -- offering and redemption price per share............... $26.94
======
SRF Shares -- offering and redemption price per share............. $24.14
======
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................... $ 21,342
Additional paid-in capital........................................ 416,754,130
Distributions in excess of net investment income.................. (181,737)
Accumulated net realized gains on investment transactions......... 22,587,253
Net unrealized appreciation on investments........................ 99,202,051
------------
NET ASSETS, AUGUST 31, 1997......................................... $538,383,039
============
</TABLE>
- ---------------
See Notes to Financial Statements.
17
<PAGE> 72
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I -- Blue
Chip Portfolio:
Dividend income................................................ $ 2,668,734
Interest income................................................ 254,784
------------
2,923,518
Expenses....................................................... 1,039,153
------------
Net Investment Income from Master Investment Trust, Series I -- Blue
Chip Portfolio..................................................... 1,884,365
------------
EXPENSES:
Shareholder service fees (A Shares)................................ 231,243
Shareholder service fees (K Shares)................................ 2,800
Shareholder service fees (SRF Shares).............................. 155,322
12b-1 fees (K Shares).............................................. 5,598
Administration fees................................................ 233,232
Transfer Agent fees................................................ 136,079
Registration fees.................................................. 23,592
Reports to shareholders............................................ 64,355
Fund accounting fees and expenses.................................. 30,564
Amortization of organization costs................................. 14,168
Audit fees......................................................... 3,570
Legal fees......................................................... 6,271
Directors' fees.................................................... 2,291
Other expenses..................................................... 39,446
------------
Total Expenses............................................... 948,531
Less: Fee waivers and expense reimbursements......................... (221,475)
------------
Total Net Expenses................................................. 727,056
------------
NET INVESTMENT INCOME................................................ 1,157,309
------------
REALIZED/UNREALIZED GAINS ON INVESTMENTS FROM INVESTMENT TRUST,
SERIES I -- BLUE CHIP PORTFOLIO:
Net realized gains on investment transactions.................... 32,224,675
Net change in unrealized appreciation on investments............. 80,612,767
------------
Net realized/unrealized gains on investments from Master Investment
Trust, Series I -- Blue Chip Portfolio............................. 112,837,442
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $113,994,751
============
</TABLE>
- ---------------
See Notes to Financial Statements.
18
<PAGE> 73
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income........................ $ 1,157,309 $ 1,022,481
Net realized gains on investment
transactions............................... 32,224,675 14,059,189
Net change in unrealized appreciation on
investments................................ 80,612,767 12,101,556
------------ ------------
Change in net assets resulting from
operations................................. 113,994,751 27,183,226
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares............................... (556,688) (980,276)
K Shares............................... (2,671) (998)(a)
SRF Shares (b)......................... (957,833) --
Net realized gains from investment
transactions:
A Shares............................... (11,977,846) (2,731,645)
K Shares............................... (149,419) (8,357)(a)
SRF Shares (b)......................... (9,569,624) --
------------ ------------
Change in net assets from shareholder
distributions................................ (23,214,081) (3,721,276)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................. 315,283,391 87,766,406
Dividends reinvested......................... 11,058,303 3,417,983
Cost of shares redeemed...................... (32,940,898) (27,378,220)
------------ ------------
Change in net assets from capital share
transactions................................. 293,400,796 63,806,169
------------ ------------
Change in net assets........................... 384,181,466 87,268,119
NET ASSETS:
Beginning of Period.......................... 154,201,573 66,933,454
------------ ------------
End of Period (including distributions in
excess of $181,737 and undistributed net
investment income of $178,145,
respectively.)............................. $538,383,039 $ 154,201,573
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
See Notes to Financial Statements.
19
<PAGE> 74
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Aggressive
Growth Fund (the "Aggressive Growth Fund") and the Pacific Horizon Blue Chip
Fund (the "Blue Chip Fund"), collectively the "Funds", individually the "Fund".
The Funds offer A Shares and effective July 22, 1996 began offering K Shares on
June 23, 1997, the Seafirst Blue Chip Fund merged into the Pacific Horizon Blue
Chip Fund and the Pacific Horizon Blue Chip Fund began offering SRF Shares. A
Shares and SRF Shares have a Shareholder Services Plan while K Shares have a
Distribution Plan and an Administrative and Shareholder Services Plan.
The Aggressive Growth Fund seeks to maximize capital appreciation through
investments in common stocks and convertible securities. The Blue Chip Fund
seeks to achieve its investment objective by investing substantially all of its
assets in the Blue Chip Portfolio (the "Portfolio") of the Master Investment
Trust, Series I (the "Trust"), an open-end management company that has the same
investment objective as that of the Blue Chip Fund. The value of the Blue Chip
Fund's investment in the Portfolio included in the accompanying Statement of
Assets and Liabilities reflects the Fund's proportionate beneficial interest in
the net assets of the Portfolio (90.7% at August 31, 1997). The financial
statements of the Portfolio, including its portfolio of investments, are
included elsewhere within this report and should be read in conjunction with the
Blue Chip Fund's financial statements.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Aggressive Growth Fund's
investment adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned
subsidiary BISYS Fund Services, Limited Partnership, served as the Funds'
administrator through September 15, 1997. Concord Financial Group, Inc. (the
"Distributor"), an indirect, wholly-owned subsidiary of BISYS, served as the
distributor of the Funds' shares through September 15, 1997. BISYS Fund
Services, Inc. ("BISYS Ohio"), also a wholly-owned subsidiary of BISYS, served
as transfer and dividend disbursing agent of the Funds through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds
20
<PAGE> 75
pursuant to the terms of an Administration Agreement between the Company and
Bank of America (the "Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), and
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and distribution calculation services for the Funds. The Funds bear
all fees and expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the Funds.
Change in Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
PORTFOLIO VALUATIONS:
The Aggressive Growth Fund values portfolio securities (other than debt
securities with remaining maturities of 60 days or less) at the last reported
sales price on the securities exchange on which such securities are primarily
traded or at the last reported sales price on the NASDAQ National Securities
Market. Securities not listed on an exchange or the NASDAQ National Securities
Market or securities for which there were no transactions are
21
<PAGE> 76
valued at the mean between the current quoted bid and ask prices on the date of
valuation. Bid price is used when no ask price is available. The Fund may also
use an independent pricing service, approved by the Board of Directors, to value
certain of their 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 Directors. Debt securities with remaining maturities of 60 days
or less are valued at amortized cost, which approximates market value.
The valuation of securities of the Blue Chip Fund's investment in the
Portfolio is discussed in Note 2 of the Portfolio's financial statements.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Aggressive Growth Fund records security transactions on a trade date
basis. Interest income, including accretion of discount and amortization of
premium, is accrued daily. Dividend income is recognized on the ex-dividend
date. Realized gains and losses from security transactions are recorded on an
identified cost basis.
The Blue Chip Fund records its share of the investment income, expenses and
realized and unrealized gains and losses recorded by the Portfolio on a daily
basis. The investment income, expenses and realized and unrealized gains and
losses are allocated daily to investors in the Portfolio based upon the value of
their investments in the Portfolio. Such investments are adjusted on a daily
basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
The Blue Chip Fund incurred certain costs in connection with its
organization. Such costs have been deferred and are being amortized on a
straight-line basis over five years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income, if any, is declared and paid as a dividend
to shareholders of record at the close of business on record date at least
annually for the Aggressive Growth Fund and quarterly for the Blue Chip Fund.
Net realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains of the
22
<PAGE> 77
Funds can be offset by capital loss carryovers of the Funds, such gains will not
be distributed. Dividends and distributions are recorded by the Funds on the ex-
dividend date.
The amount of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
ACCUMULATED NET
UNDISTRI- REALIZED
BUTED NET GAIN/(LOSS)
INVESTMENT ON
INCOME INVESTMENTS
---------- -----------
<S> <C> <C>
Aggressive
Growth Fund $2,598,657 $(2,588,091)
Blue Chip Fund -- 72
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Aggressive Growth Fund has an Investment Advisory Agreement with Bank of
America and the Funds had an Administration Agreement with BISYS and a
Distribution Agreement with the Distributor. Pursuant to the terms of the
Investment Advisory Agreement, Bank of America is entitled to a fee from the
Aggressive Growth Fund, which is accrued daily and payable monthly, at an annual
rate of 0.60% of the Fund's average daily net assets. Pursuant to the terms of
the Administration Agreement, BISYS is entitled to a fee which is accrued daily
and payable monthly, at an annual rate of 0.30% and 0.15% of the average daily
net assets of the Aggressive Growth Fund and
23
<PAGE> 78
Blue Chip Fund, respectively. For the six months ended August 31, 1997, BISYS
agreed to waive $73,396 of its fee as Administrator for the Blue Chip Fund. For
the six months ended August 31, 1997, BISYS reimbursed $303 of operating
expenses of the Blue Chip Fund.
For the six months ended August 31, 1997, the Distributor advised the Funds
that it retained $25,093 and $90,494 from commissions earned on sales of the
Aggressive Growth Fund's and Blue Chip Fund's shares, respectively. For the same
period, Bank of America and its affiliates advised the Funds that they retained
$151,195 and $706,924 from commissions earned on sales of shares of the
Aggressive Growth Fund and Blue Chip Fund, respectively.
The Funds have a Shareholder Services Plan (the "Plan") under which each
Fund pays the Distributor for shareholder servicing expenses incurred in
connection with A Shares of each Fund. Under the Plan, payments for shareholder
servicing expenses may not exceed 0.25% of each Fund's average daily net assets
for A Shares. For the six months ended August 31, 1997, the Aggressive Growth
Fund and Blue Chip Fund incurred charges of $247,405 and $231,243, respectively,
pursuant to the Plan. The Funds were advised that of these amounts, the
Distributor retained $141,200 and $32,170 from the Aggressive Growth Fund and
Blue Chip Fund, respectively, and affiliates of Bank of America retained $99,984
and $194,756, respectively. The Plan provides that if, in any month, the fees
paid to the Distributor are less than the costs incurred by the Distributor, the
excess costs will be included in future computations of the fee, provided that
any excess costs will not be carried forward beyond the end of the fiscal year
in which such excess costs were incurred.
The Funds have adopted a Distribution Plan and an Administrative and
Shareholder Services Plan (the "Administrative Plan") with respect to K Shares
of the Funds. Under the Distribution Plan, the Funds pay the Distributor for
expenses primarily intended to result in the sale of the Funds' K Shares. Under
the Distribution Plan, payments by the Funds for distribution expenses may not
exceed 0.75% of the average daily net assets of each Fund's K Shares. Payments
for distribution expenses under the Distribution Plan are subject to Rule 12b-1
under the Act. Under the Administrative Plan, the Funds pay for expenses
incurred in connection with shareholder services provided by the Distributor and
payments to Service Organizations for the provision of support services with
respect to beneficial owners of K Shares. Under the Administrative Plan,
payments for shareholder services and administrative services may not exceed
0.25% and 0.75%, respectively, of the average daily net assets of each Fund's K
Shares. The total of all payments under the Distribution Plan and the
Administrative Plan may not exceed, in the aggregate, the annual rate of 1.00%
of the average daily net assets of each Fund's K Shares. For the six months
ended August 31, 1997, the Distributor incurred charges $1,871 and $5,581 for
24
<PAGE> 79
the Aggressive Growth and Blue Chip Funds, respectively.
The Blue Chip Fund has a Shareholder Services Plan under which the Fund pays
the Distributor for shareholder servicing expenses incurred in connection with
the SRF shares. Under the Plan, payments for shareholder servicing expenses may
not exceed 0.25% of the Fund's average daily net assets for SRF Shares. For the
six months ended August 31, 1997, The Blue Chip Fund incurred charges of
$155,322, pursuant to the Plan, the Fund was advised that of this amount the
affiliates of Bank of America retained $16,258. For the same period $139,064 of
shareholder servicing were waived by The Blue Chip Fund.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $220,714 and $136,079 from the Aggressive
Growth Fund and Blue Chip Fund, respectively, for the six months ended August
31, 1997.
For the six months ended August 31, 1997, the Aggressive Growth Fund and
Blue Chip Fund incurred legal charges totaling $8,260 and $6,271, respectively,
which were earned by a law firm, a partner of which serves as Secretary of the
Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. In addition, the
amount payable each year to a Director who dies or resigns shall be increased by
$1,000 for each year of service that the Director served as Chairman of the
Board. Each Director may receive any benefits payable under the Retirement Plan,
at his
25
<PAGE> 80
or her election, either in one lump sum payment or ten annual installments. A
Director's years of service for the purpose of calculating the payments
described above shall be based upon service as a Director or Chairman after
February 28, 1994. Aggregate costs pursuant to the Retirement Plan amounted to
$736 and $210 for the Aggressive Growth Fund and Blue Chip Fund, respectively,
for the six months ended August 31, 1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of the Aggressive Growth Fund's portfolio securities
(excluding short-term investments) amounted to $68,932,455 and $88,008,911,
respectively.
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of common stock of the Funds are summarized below:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
------------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued..................... 4,075 $ 79,695 22,844 $ 554,053
Reinvested................. 447 8,863 2,367 46,829
Redeemed................... (4,854) (95,427) (22,585) (550,667)
------- ---------- ------- ----------
Net increase (decrease)...... (332) $ (6,869) 2,626 $ 50,215
======= ========== ======= ==========
K Shares
Issued..................... 43,896 $ 850,667 16,509 $ 352,493
Reinvested................. 2,035 40,113 1,198 22,851
Redeemed................... (10,487) (207,371) (298) (6,029)
------- ---------- ------- ----------
Net increase................. 35,444 $ 683,409 17,409(a) $ 369,315(a)
======= ========== ======= ==========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
26
<PAGE> 81
<TABLE>
<CAPTION>
BLUE CHIP FUND
------------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued..................... 2,546 $ 67,284 3,838 $ 86,308
Reinvested................. 410 10,906 152 3,409
Redeemed................... (1,010) (26,554) (1,193) (27,364)
------- ---------- ------- ----------
Net increase................. 1,946 $ 51,636 2,797 $ 62,353
======= ========== ======= ==========
K Shares
Issued..................... 70,314 $1,881,745 57,851 $1,458,223
Reinvested................. 5,713 152,121 405 9,313
Redeemed................... (19,927) (541,316) (561) (13,822)
------- ---------- ------- ----------
Net increase................. 56,100 $1,492,550 57,695(a) $1,453,714(a)
======= ========== ======= ==========
SRF Shares(000's) (b)
Issued..................... 13,486 $ 246,713 -- $ --
Reinvested................. -- -- -- --
Redeemed................... (260) (6,441) -- --
------- ---------- ------- ----------
Net increase................. 13,226 $ 240,272 -- $ --
======= ========== ======= ==========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (inception date) to August 31, 1997.
27
<PAGE> 82
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(A) 1996 1995 1994
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR................ $ 19.60 $ 23.49 $ 20.61 $ 25.70 $ 24.68
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (loss)..... (0.13) (0.25) (0.27) (0.22) (0.37)
Net realized and unrealized gains
(losses) on investment
transactions................... 2.87 2.26 8.35 (0.95) 3.02
-------- -------- -------- -------- --------
Total income (loss) from
investment operations............ 2.74 2.01 8.08 (1.17) 2.65
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends to shareholders from
net realized gains on
investment transactions........ (0.95) (5.90) (5.20) (3.92) (1.63)
-------- -------- -------- -------- --------
Net change in net asset value per
share............................ 1.79 (3.89) 2.88 (5.09) 1.02
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD........................... $ 21.39 $ 19.60 $ 23.49 $ 20.61 $ 25.70
======== ======== ======== ======== ========
Total return (excludes sales
charge).......................... 14.45%(e) 9.13% 40.88% (3.59)% 10.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)..................... $ 213 $ 202 $ 180 $ 132 $ 158
Ratio of expenses to average net
assets......................... 1.50%(d) 1.42% 1.51% 1.46% 1.52%
Ratio of net investment income
(loss) to average net assets... (1.27)%(d) (1.26)% 1.35% 1.04% 1.20%
Ratio of expenses to average net
assets*........................ (b) 1.44%** 1.64%** (b) (b)
Ratio of net investment income to
average net assets*............ (b) (b) (b) (b) (b)
Portfolio turnover rate.......... 36% 99% 93% 92% 43%
Average commission rate paid
(c)............................ $ 0.0312 $ 0.0312 $ -- $ -- $ --
</TABLE>
- ---------------
<TABLE>
<S> <C>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such
voluntary fee reductions and/or reimbursements had not occurred, the ratios would have been
as indicated.
** During the years ended February 28, 1997 and February 29, 1996, the Portfolio received
credits from its custodian for interest earned on uninvested balances which were used to
offset custodian fees and expenses. If such credits had not occurred, the expense ratios
would have been as indicated. The ratio of net investment income was not affected.
(a) As of July 22, 1996, the Portfolio designated the existing series of shares as "A" Shares.
(b) There were no waivers or reimbursements during the period.
(c) Represents the dollar amounts of commissions paid on Portfolio transactions divided by the
total number of shares purchased or sold for which commissions were charged and is
calculated on the basis of the Portfolio as a whole without distinguishing between the
classes of shares issued. Disclosure is not required for prior periods.
(d) Annualized.
(e) Not annualized.
</TABLE>
See Notes to Financial Statements.
28
<PAGE> 83
PACIFIC HORIZON AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(A)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR....... $ 19.53 $ 24.20
-------- --------
Income from Investment Operations:
Net investment (loss)............................ (0.25) (0.06)
Net realized gains on investment transactions.... 2.93 1.29
-------- --------
Total income from investment operations............ 2.68 1.23
-------- --------
Less Dividends and Distributions:
Dividends to shareholders from net realized gains
on investment transactions..................... (0.95) (5.90)
-------- --------
Net change in net asset value per share............ 1.73 (4.67)
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD........... $ 21.26 $ 19.53
======== ========
Total return....................................... 14.13% (c) 5.65% (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)................ $ 1,124 $ 340
Ratio of expenses to average net assets.......... 1.99% (d) 1.95% (d)
Ratio of net investment (loss) to average net
assets......................................... (1.74)%(d) (1.78)%(d)
Ratio of expenses to average net assets*......... 2.24% (d) 2.22% (d)**
Ratio of net investment (loss) to average net
assets*........................................ (1.99)%(d) (2.03)%(d)
Portfolio turnover rate.......................... 36% 99%
Average commission rate paid (b)................. $0.0312 $ 0.0312
</TABLE>
- ---------------
<TABLE>
<S> <C>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the ratios
would have been as indicated.
** During the year ended February 28, 1997, the Portfolio received credits from its
custodian for interest earned on uninvested balances which were used to offset
custodian fees and expenses. If such credits had not the expense ratios would
have been as indicated. The ratio of net investment income was not affected.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Represents the dollar amounts of commissions paid on Portfolio transactions
divided by the total number of shares purchased or sold for which commissions
were charged and is calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued. Disclosure is not required
for prior periods.
(c) Not annualized.
(d) Annualized.
</TABLE>
See Notes to Financial Statements.
29
<PAGE> 84
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(A) 1996 1995 1994(B)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR.............................. $ 25.22 $20.53 $15.81 $14.97 $15.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................ 0.08 0.23 0.26 0.31 0.02
Net realized and unrealized gains
(losses) on investment
transactions....................... 3.52 5.21 4.96 0.80 (0.05)
-------- -------- -------- -------- --------
Total income (loss) from investment
operations........................... 3.60 5.44 5.22 1.11 (0.03)
-------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income.................. (0.08) (0.22) (0.28) (0.27) --
Dividends to shareholders from net
realized gains on investment
transactions....................... (1.74) (0.53) (0.22) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions..... (1.82) (0.75) (0.50) (0.27) --
-------- -------- -------- -------- --------
Net change in net asset value per
share................................ 1.78 4.69 4.72 0.84 (0.03)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................... $ 27.00 $25.22 $20.53 $15.81 $14.97
======== ======== ======== ======== ========
Total return (excludes sales
charge).............................. 14.42%++ 27.01% 33.39% 7.60% (0.20)%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)......................... $ 216 $ 153 $ 67 $ 6 $ 1
Ratio of expenses to average net
assets............................. 1.24%+ 1.28% 0.83% 0.00% 0.00%+
Ratio of net investment income (loss)
to average net assets.............. 0.67%+ 0.99% 1.63% 2.46% 2.92%+
Ratio of expenses to average net
assets*............................ 1.33%+ 1.71% 2.28% 6.32% 55.00%+
Ratio of net investment income to
average net assets*................ 0.58%+ 0.56% 0.18% (3.86)% (52.08)%+
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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.
+ Annualized.
++ Not annualized.
(a) As of July 22, 1996, the Fund designated the existing series of shares as "A" Shares.
(b) Period from January 13, 1994 (inception date) to February 28, 1994.
</TABLE>
See Notes to Financial Statements.
30
<PAGE> 85
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(A)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR............... $ 25.20 $20.38
-------- --------
Income from Investment Operations:
Net investment income.................................... 0.04 0.07
Net realized gains/(losses) on investment transactions... 3.47 5.35
-------- --------
Total income from investment operations.................... 3.51 5.42
-------- --------
Less: Dividends and Distributions:
Dividends to shareholders from net investment income..... (0.03) (0.07)
Distributions to shareholders from net realized gains on
investment transactions................................ (1.74) (0.53)
-------- --------
Total Dividends and Distributions.......................... (1.77) (0.60)
-------- --------
Net change in net asset value per share.................... 1.74 4.82
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD................... $ 26.94 $25.20
======== ========
Total return............................................... 14.10%++ 26.96%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................... $ 3 $ 1
Ratio of expenses to average net assets.................. 1.73%+ 1.92%+
Ratio of net investment income to average net assets..... 0.17%+ 0.45%+
Ratio of expenses to average net assets*................. 1.81%+ 2.12%+
Ratio of net investment income to average net assets*.... 0.09%+ 0.25%+
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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.
+ Annualized.
++ Not annualized.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
</TABLE>
See Notes to Financial Statements.
31
<PAGE> 86
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-------------------------- FOR THE PERIOD
JUNE 23, MARCH 1, --------------------------
1997 1997 DECEMBER 6, JANUARY 1,
THROUGH THROUGH YEAR ENDED 1993 1993
AUGUST 31, JUNE 22, ------------------------------------------ THROUGH THROUGH YEAR ENDED
1997 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, DECEMBER 5, DECEMBER 31,
(UNAUDITED) (UNAUDITED) 1997 1996 1995 1994 1993(A) 1992(A)
----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET
VALUE PER
SHARE,
BEGINNING
OF YEAR.... $ 24.02 $ 24.64 $21.09 $17.35 $17.75 $17.34 $ 15.65 $15.17
-------- -------- -------- -------- -------- -------- ------- ------
Income from
Investment
Operations:
Net
investment
income.... 0.04 4.01 0.31 0.31 0.28 0.05 0.29 0.30
Net
realized
and
unrealized
gains
(losses)
on
investment
transactions... 0.08 (0.57) 4.83 5.35 0.88 0.37 1.69 0.48
-------- -------- -------- -------- -------- -------- ------- ------
Total income
from
investment
operations... 0.12 3.44 5.14 5.66 1.16 0.42 1.98 0.78
-------- -------- -------- -------- -------- -------- ------- ------
Less
Dividends
and
Distributions:
Dividends
to
shareholders
from net
investment
income.... -- (4.06) (0.31) (0.31) (0.26) (0.01) (0.29) (0.30)
Distributions
to
shareholders
from net
realized
gains..... -- -- (1.28) (1.61) (1.30) -- -- --
-------- -------- -------- -------- -------- -------- ------- ------
Total
Dividends
and
Distributions.. -- (4.06) (1.59) (1.92) (1.56) (0.01) (0.29) (0.30)
-------- -------- -------- -------- -------- -------- ------- ------
Net change
in net
asset value
per
share...... 0.12 (0.62) 3.55 3.74 (0.40) 0.41 1.69 0.48
-------- -------- -------- -------- -------- -------- ------- ------
NET ASSET
VALUE PER
SHARE, END
OF
PERIOD..... $ 24.14 $ 24.02 $24.64 $21.09 $17.35 $17.75 $ 17.34 $15.65
======== ======== ======== ======== ======== ======== ======= ======
Total
Return..... 14.58%++ 11.64% 27.42% 33.37% 6.95% 2.42%+ 12.74%++ 5.16%
RATIO/SUPPLEMENTAL
DATA:
Net assets,
end of
period
(millions)... $ 319 $ 272 $ 274 $ 206 $ 151 $ 133 $ 123 _ $ 96
Ratio of
expenses
to average
net
assets.... 0.96%+ 0.89% 0.92% 0.95% 0.82% 0.95%+ 0.95%+ 0.95%
Ratio of
net
investment
income to
average
net
assets.... 0.87%+ 1.07% 1.37% 1.53% 1.64% 1.28%+ 1.91%+ 2.08%
Ratio of
expenses
to average
net
assets*... 1.20%+ 1.57% 1.55% 1.54% 1.62% 1.88%* 0.95%+ 0.95%
Ratio of
net
investment
income to
average
net
assets*... 0.63%+ 0.39% 0.74% 0.94% 0.84% 0.35%* 1.91%+ 2.08%
Portfolio
turnover
rate...... 35% N/A N/A N/A N/A N/A 4% 27%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements
had not occurred, the ratios would have been as indicated.
(a) 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.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
32
<PAGE> 87
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COMMON STOCK -- 96.7%
AEROSPACE/DEFENSE -- 2.7%
General Dynamics Corp. ............................................. 28,900 $ 2,301,163
Lockheed Martin Corp. .............................................. 52,700 5,464,331
United Technologies Corp. .......................................... 106,900 8,344,881
------------
16,110,375
------------
AIRLINES -- 0.3%
U.S. Air Group, Inc.** ............................................. 45,800 1,562,925
------------
AUTOMOBILE MANUFACTURERS -- 1.8%
Ford Motor Co. ..................................................... 144,300 6,204,900
General Motors Corp. ............................................... 72,700 4,561,925
------------
10,766,825
------------
AUTOMOBILE PARTS -- 0.6%
Dana Corp. ......................................................... 76,100 3,505,356
------------
BEVERAGES -- 2.9%
Coca-Cola Co. ...................................................... 204,400 11,714,675
PepsiCo, Inc. ...................................................... 166,100 5,979,600
------------
17,694,275
------------
BUILDING RELATED -- 0.4%
Centex Corp. ....................................................... 47,600 2,588,250
------------
CHEMICALS -- 3.0%
Air Products & Chemicals, Inc. ..................................... 61,600 5,024,250
DuPont, (E.I.) de Nemours & Co. .................................... 202,600 12,624,512
------------
17,648,762
------------
CLOTHING & APPAREL -- 0.5%
VF Corp. ........................................................... 34,100 3,013,587
------------
COMPUTER HARDWARE -- 5.3%
Compaq Computer Corp.** ............................................ 169,750 11,118,625
Dell Computer Corp.** .............................................. 110,400 9,059,700
International Business Machines Corp. .............................. 64,000 6,456,000
Sun Microsystems, Inc.** ........................................... 105,200 5,049,600
------------
31,683,925
------------
COMPUTER SERVICES & SOFTWARE -- 3.8%
Microsoft Corp.** .................................................. 136,600 18,056,813
Oracle Corp.** ..................................................... 121,650 4,637,906
------------
22,694,719
------------
CONSUMER PRODUCTS & SERVICES -- 3.7%
Avon Products, Inc. ................................................ 92,000 5,893,750
Philip Morris Cos., Inc. ........................................... 241,800 10,548,525
Texas Instruments, Inc. ............................................ 51,200 5,817,600
------------
22,259,875
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 2.7%
General Electric Co. ............................................... 260,200 16,262,500
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
33
<PAGE> 88
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
ENTERTAINMENT & LEISURE -- 1.9%
Hasbro, Inc. ....................................................... 103,450 $ 2,780,219
King World Productions, Inc. ....................................... 55,600 2,210,100
Walt Disney Co. .................................................... 81,478 6,258,529
------------
11,248,848
------------
FINANCIAL -- BANK & TRUST -- 9.3%
Barnett Banks, Inc. ................................................ 113,100 7,704,937
Bankers Trust New York Corp. ....................................... 49,300 5,114,875
Chase Manhattan Corp. .............................................. 36,000 4,002,750
Citicorp ........................................................... 38,200 4,875,275
Comerica, Inc. ..................................................... 51,500 3,646,844
First Union Corp. .................................................. 178,600 8,583,962
Fleet Financial Group, Inc. ........................................ 98,900 6,372,869
Mellon Bank Corp. .................................................. 141,200 6,795,250
NationsBank Corp. .................................................. 64,900 3,853,437
State Street Corp. ................................................. 88,600 4,418,925
------------
55,369,124
------------
FINANCIAL SERVICES -- 1.4%
Morgan Stanley Dean Witter Discover & Co. .......................... 173,200 8,335,250
------------
FOOD -- 3.4%
American Stores Co. ................................................ 219,300 5,194,669
Conagra, Inc. ...................................................... 85,600 5,505,150
Hershey Foods Corp. ................................................ 62,300 3,325,262
Kellogg Co. ........................................................ 37,200 1,664,700
Sara Lee Corp. ..................................................... 112,400 4,524,100
------------
20,213,881
------------
HEALTHCARE SERVICES -- 1.0%
Tenet Healthcare Corp.** ........................................... 218,200 5,945,950
------------
HOUSEHOLD PRODUCTS -- 2.6%
Clorox Co. ......................................................... 37,000 4,856,250
Procter & Gamble Co. ............................................... 80,700 10,738,144
------------
15,594,394
------------
HOTELS & MOTELS -- 0.6%
Marriott Corp.** ................................................... 54,700 3,640,969
------------
INSURANCE -- 4.8%
Allstate Corp. ..................................................... 70,197 5,128,768
CIGNA Corp. ........................................................ 38,600 7,078,275
Conseco, Inc. ...................................................... 138,900 5,972,700
General Re Corp. ................................................... 19,200 3,722,400
Travelers Group, Inc. .............................................. 104,100 6,610,350
------------
28,512,493
------------
MACHINERY & EQUIPMENT -- 1.7%
Caterpillar, Inc. .................................................. 67,000 3,890,188
Ingersoll Rand Co. ................................................. 48,200 2,898,025
Parker Hannifin Corp. .............................................. 48,200 3,099,863
------------
9,888,076
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.7%
Abbot Laboratories ................................................. 66,800 4,003,825
Johnson & Johnson Co. .............................................. 165,800 9,398,787
U.S. Surgical Corp. ................................................ 77,800 2,562,538
------------
15,965,150
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
34
<PAGE> 89
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
METALS & MINING -- 1.3%
Phelps Dodge Corp. ................................................. 54,800 $ 4,407,975
USX -- U.S. Steel Group, Inc. ...................................... 93,800 3,294,725
------------
7,702,700
------------
MULTI-INDUSTRY -- 2.3%
Dover Corp. ........................................................ 59,600 4,116,125
Tyco International Ltd. ............................................ 117,500 9,216,406
------------
13,332,531
------------
OIL (DOMESTIC) -- 1.8%
Phillips Petroleum Co. ............................................. 110,600 5,260,413
USX -- Marathon Group .............................................. 170,400 5,548,650
------------
10,809,063
------------
OIL (INTERNATIONAL) -- 5.8%
Chevron Corp. ...................................................... 109,100 8,448,431
Exxon Corp. ........................................................ 201,100 12,304,806
Mobil Corp. ........................................................ 102,900 7,485,975
Royal Dutch Petroleum Co. .......................................... 116,400 5,907,300
------------
34,146,512
------------
OIL & GAS -- 1.2%
Schlumberger, Ltd. ................................................. 96,000 7,314,000
------------
PAPER & FOREST PRODUCTS -- 1.1%
James River Corp. of Virginia** .................................... 110,500 4,641,000
Weyerhaeuser Co. ................................................... 36,400 2,102,100
------------
6,743,100
------------
PHARMACEUTICALS -- 6.6%
Bristol-Meyers ..................................................... 113,800 8,648,800
Lilly, (Eli) & Co. ................................................. 57,100 5,974,088
Merck & Co., Inc. .................................................. 142,400 13,074,100
Schering-Plough Corp. .............................................. 161,700 7,761,600
Warner-Lambert Co. ................................................. 31,300 3,977,056
------------
39,435,644
------------
PRINTING & PUBLISHING -- 0.9%
McGraw-Hill Cos., Inc. ............................................. 43,400 2,660,963
New York Times Co. ................................................. 52,700 2,490,075
------------
5,151,038
------------
SEMI-CONDUCTORS -- 2.6%
Applied Materials, Inc.** .......................................... 43,600 4,114,750
Motorola, Inc. ..................................................... 150,300 11,028,262
------------
15,143,012
------------
RAILROADS -- 1.0%
Burlington Northern Santa Fe ....................................... 61,700 5,657,119
------------
RETAIL & MERCHANDISING -- 4.0%
CUC International, Inc. ............................................ 194,100 4,561,350
Dayton Hudson Corp. ................................................ 47,400 2,701,800
Home Depot, Inc. ................................................... 208,900 9,857,469
TJX Companies, Inc. ................................................ 233,000 6,407,500
------------
23,528,119
------------
TELECOMMUNICATIONS -- 2.5%
3Com Corp.** ....................................................... 91,400 4,564,288
Lucent Technologies, Inc. .......................................... 66,000 5,139,750
Tellabs, Inc.** .................................................... 86,000 5,133,125
------------
14,837,163
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
35
<PAGE> 90
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
UTILITIES -- GAS -- 0.7%
Pacific Enterprises ................................................ 116,900 $ 3,850,394
------------
UTILITIES -- ELECTRIC -- 2.3%
FPL Group, Inc. .................................................... 147,300 6,849,450
GPU, Inc. .......................................................... 200,300 6,735,087
------------
13,584,537
------------
UTILITIES -- TELEPHONE -- 5.5%
Ameritech Corp. .................................................... 110,400 6,920,700
Bell Atlanta Corp. ................................................. 105,522 7,637,126
BellSouth Corp. .................................................... 176,300 7,757,200
U.S. WEST Communications Group ..................................... 106,000 3,796,125
WorldCom, Inc.** ................................................... 210,300 6,295,856
------------
32,407,007
------------
TOTAL COMMON STOCK (COST $465,960,052) .............................. 574,147,448
------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
---- -------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
U.S. Treasury Bill (Cost $995,248)............. 5.31% 10/02/97 $1,000,000 995,248
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 3.0%
Temporary Investment Fund (Cost $17,766,052) ........................ 17,766,052 17,766,052
------------
TOTAL INVESTMENTS -- 99.8% (COST $484,721,532)(A)................................. 592,908,748
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%..................................... 920,282
------------
NET ASSETS -- 100.0%.............................................................. $593,829,030
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $593,829,030.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................ $111,454,572
Unrealized depreciation................................ (3,267,356)
------------
Net unrealized appreciation............................ $108,187,216
============
</TABLE>
* Effective Yield.
** Non-income producing security.
Schedule of Open Financial Futures Contracts Purchased
<TABLE>
<CAPTION>
NET UNREALIZED
EXPIRATION NUMBER OF CONTRACT APPRECIATION
DATE CONTRACTS CONTRACTS VALUE OF CONTRACTS
- ---------- --------- ------------------------ ----------- --------------
<S> <C> <C> <C> <C>
9/19/97 30 S&P 500 -- September 1997 $13,546,500 $ 49,500
========
</TABLE>
See Notes to Financial Statements.
36
<PAGE> 91
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $484,721,532).............. $592,908,748
Dividend Receivable................................................. 1,014,093
Interest Receivable................................................. 72,165
Contribution receivable............................................. 1,439,225
Variation margin receivable on futures contract..................... 49,500
Deferred organization costs......................................... 17,313
Prepaid expenses.................................................... 48,594
------------
Total Assets.......................................................... 595,549,638
------------
LIABILITIES
Withdrawal payable.................................................. 1,142,882
Advisory fees payable............................................... 256,754
Administration fees payable......................................... 25,676
Audit fees payable.................................................. 26,732
Fund accounting fees and expense payable............................ 46,817
Custodian fees payable.............................................. 3,795
Legal fees payable.................................................. 15,914
Other accrued expenses.............................................. 202,038
------------
Total Liabilities..................................................... 1,720,608
------------
NET ASSETS............................................................ $593,829,030
============
</TABLE>
- ---------------
See Notes to Financial Statements.
37
<PAGE> 92
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income...................................................... $ 4,613,845
Interest income...................................................... 429,249
-----------
Total income....................................................... 5,043,094
-----------
EXPENSES
Advisory fees........................................................ 1,754,959
Administration fees.................................................. 136,084
Fund accounting fees and expenses.................................... 140,530
Audit fees........................................................... 12,735
Custodian fees and expenses.......................................... 35,526
Legal fees........................................................... 22,373
Trustees' fees....................................................... 12,703
Amortization of organization costs................................... 6,992
Other expenses....................................................... 8,063
-----------
Total Expenses..................................................... 2,129,965
Less: Fee waivers and expense reimbursements......................... (279,642)
-----------
Total Net Expenses................................................... 1,850,323
-----------
Net Investment Income.................................................. 3,192,771
-----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions........................ 34,879,065
Net change in unrealized appreciation on investments and futures..... 35,352,626
-----------
Net realized/unrealized gains on investments and futures............... 70,231,691
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $73,424,462
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
38
<PAGE> 93
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Operations:
Net investment income.................................. $ 3,192,771 $ 5,845,867
Net realized gains on investment transactions.......... 34,879,065 62,491,398
Net change in unrealized appreciation on investments... 35,352,626 26,358,970
------------ ------------
Change in net assets resulting from operations......... 73,424,462 94,696,235
------------ ------------
Trust Share Transactions:
Contributions.......................................... 100,389,612 176,422,520
Withdrawals............................................ (56,551,614) (70,074,459)
------------ ------------
Change in net assets from trust share transactions....... 43,837,998 106,348,061
------------ ------------
Change in net assets..................................... 117,262,460 201,044,296
NET ASSETS
Beginning of Period.................................... 476,566,570 275,522,274
------------ ------------
End of Period.......................................... $593,829,030 $476,566,570
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
39
<PAGE> 94
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
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 August 31, 1997, the Trust
consisted of two portfolios. The accompanying financial statements and notes are
those of the Blue Chip Portfolio (the "Portfolio") only.
The investment objective of the Portfolio is long term capital appreciation
through investments in blue chip stocks.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, served as the Portfolio's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly owned subsidiary,
BISYS Fund Services, Limited Partnership serves as the Portfolio's
administrator. Effective September 15, 1997, PFPC Inc., wholly owned subsidiary
of PNC Bank Corp., serves as administrator for the Trust.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the 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 in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
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 securities exchange on which such securities
are primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. 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
40
<PAGE> 95
amortized cost, which approximates market value.
FUTURES:
A futures contract is an agreement to purchase or sell a specified quantity
of an underlying instrument at a specified future date or to make or receive a
cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Upon entering into such a contract the Portfolio is required to pledge
to the broker an amount of cash and/or securities equal to the minimum "initial
margin" requirements of the exchange. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time when it was closed. The Portfolio invests
in futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest rates. The
use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets, and the possible inability of counterparties to meet the terms of
their contracts. The summary of open financial futures contracts at August 31,
1997 is included in the Portfolio's Schedule of Investments which is included
elsewhere in this report.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recorded on the ex-dividend date. Realized gains and
losses on securities transactions are determined on the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
FEDERAL INCOME TAXES:
The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
Portfolio 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.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has an Investment Advisory Agreement with Bank of
41
<PAGE> 96
America and an Administration Agreement with BISYS.
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 Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, which is accrued daily and
payable monthly, at an annual rate of 0.75% from March 1, 1997 through June 22,
1997, and 0.50% from June 23, 1997 through August 31, 1997 of the average daily
net assets of the Portfolio. For the six months ended August 31, 1997, Bank of
America waived $262,519 in fees as Adviser of the Portfolio.
As Administrator, BISYS assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, BISYS is
entitled to a fee which is accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the six months ended
August 31, 1997, BISYS waived $17,123 in fees as Administrator of the Portfolio.
For services provided to all three of the portfolios constituting the Trust,
each Trustee receives an annual fee of $3,000 and a meeting fee of $500.
For the six months ended August 31, 1997, the Portfolio incurred legal
expenses of $22,373, which were earned by a law firm, a partner of which serves
as Secretary of the Trust.
Certain officers of the Trust are affiliated with BISYS. Such persons are
not paid directly by the Trust for serving in these capacities.
NOTE 4 -- SECURITIES TRANSACTIONS
During the six months ended August 31, 1997, the Portfolio purchased and
sold portfolio securities, excluding short-term securities, in the following
amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Total Common
Stocks $230,612,694 $181,509,424
</TABLE>
42
<PAGE> 97
MASTER INVESTMENT TRUST SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994*
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net
assets............................... 0.75%** 0.62% 0.31% 0.17% 0.27%**
Ratio of net investment income to
average net assets................... 1.30%** 1.62% 2.16% 2.30% 1.97%**
Ratio of expenses to average net
assets(a)............................ 0.87%** 0.90% 0.90% 0.97% 1.07%**
Ratio of net investment income to
average net assets(a)................ 1.19%** 1.34% 1.57% 1.50% 1.17%**
Portfolio Turnover.................... 35% 91% 108% 44% 86%
Average Commission rate paid(b)....... $0.0506 $ 0.0530 -- -- --
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(b) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged.
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.
** Annualized.
43
<PAGE> 98
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 99
----------------
Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 237
----------------
[PACIFIC HORIZON FUNDS LOGO]
Provident Distributor, Inc., Distributor
GRW-0069 10/97
<PAGE> 100
PACIFIC HORIZON FUNDS, INC.
SRF SHARES OF THE
Asset Allocation Fund
Blue Chip Fund
Intermediate Bond Fund
PACIFIC HORIZON FUNDS, INC.
Prime Fund
SEMI-ANNUAL REPORT
August 31, 1997
NOT FDIC INSURED
Provident Distributors, Inc., Distributor
PACIFIC HORIZON FUNDS, INC.
<PAGE> 101
PACIFIC HORIZON FUNDS, INC.
103 Bellevue Parkway
Wilmington, DE 19809
1-800-332-3863
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
ADMINISTRATOR
Bank of America National
Trust and Savings Association
555 California Street
San Francisco, CA 94104
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
Conshohocken, PA 191428
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Pacific Horizon Funds, Inc. are sponsored and distributed by Provident
Distributors, Inc. which is unaffiliated with the Bank of America. Bank of
America serves as investment adviser to the Funds and receives fees for such
services. From time to time, Bank of America may provide other services to the
Funds for additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
<TABLE>
<S> <C>
=========================================================================
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, NOT
BANK OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN FDIC
MUTUAL FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE INSURED
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>
-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 102
CONTENTS
<TABLE>
<S> <C>
. ECONOMIC REVIEW 2-3
. PACIFIC HORIZON ASSET ALLOCATION
. FUND
. Portfolio of Investments 4-10
. Statement of Assets and
. Liabilities 11
. Statement of Operations 12
. Statements of Changes
. in Net Assets 13
. PACIFIC HORIZON BLUE CHIP FUND AND
. PACIFIC HORIZON INTERMEDIATE BOND
. FUND
. Statements of Assets and
. Liabilities 14-15
. Statements of Operations 16-17
. Statements of Changes
. in Net Assets 18-19
. Notes to Financial Statements 20-28
. Financial Highlights 29-41
. MASTER INVESTMENT TRUST -- SERIES I
. Portfolios of Investments 42-47
. Statements of Assets
. and Liabilities 48-49
. Statements of Operations 50-51
. Statements of Changes
. in Net Assets 52-53
. Notes to Financial Statements 54-56
. Supplementary Data 57-58
. PACIFIC HORIZON PRIME FUND
. Portfolio of Investments 59-67
. Statement of Assets
. and Liabilities 68
. Statement of Operations 69
. Statements of Changes
. in Net Assets 70
. Notes to Financial Statements 71-77
. Financial Highlights 78-83
</TABLE>
<PAGE> 103
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISOR
The Standard & Poor's Stock Index posted a total return of 23% during the eight
month period ending August 31, 1997, continuing to reward long-term investors.*
Large company stocks continued to be the best performers over the period, but
small company stocks began a summer rally that outpaced the larger companies,
with the Russell 2000 Index outgaining the Standard & Poor's 500 Index by more
than 10% for the four months ending August 31, 1997*. The announcement of
earnings shortfalls at some highly visible large companies, a strong U.S. dollar
and concerns about international growth and the Asia pacific economies fueled
this interest in the small cap market.
Concerns about the rate of growth in the U.S. economy continued to influence
interest rates, with interest rates rising during the first quarter as the
Federal Reserve tightened in response to reports of strong demand. As the
economy began to show signs of slower growth, interest rates declined on the
perception that the Fed would remain on hold. However, when it became clear that
second quarter growth reports were considerably stronger than initially
reported, interest rates rose sharply, giving back some of the earlier decline.
LOOKING FORWARD
There is a difference of opinion among Wall Street economists on the outlook for
1998, and there appear to be two camps of economists. One camp, which we have
named the "strong growth" camp, sees the economy poised to get even stronger,
with the risk of even tighter labor and product markets and possible higher
interest rates ahead. This camp is forecasting real Gross Domestic Product (GDP)
growth of 3.0 percent in 1998, with continued strength in the industrial economy
and in business investment, particularly on technology. The strong growth camp
also sees above average gains in real disposable income continuing to fuel
consumer confidence and thus spending. A second group, which we call the "trend
growth" camp, forecasts a GDP growth of 2.4 percent and believes that the
economy will muddle along at or around trend growth for the next several
quarters, with little pickup in inflation. This group sees consumer debt loads
impacting consumer spending and sees residential construction flattening or
declining. This camp also sees the recent buildup of inventory as a potential
drag on growth. A key factor in the market's performance for the balance of 1997
and in 1998 will be the actions, or lack of actions, taken by the Federal
Reserve. The challenge for the Federal Reserve in setting interest rate policy
will be to forecast any imbalances that lie ahead, decide which camp is right,
and act accordingly.
Given the evidence so far, we continue to side with the trend growth camp and
believe the Federal Reserve will likely remain on hold through year end, waiting
for signs of rekindled inflation. Sta-
- ---------------
* The S&P 500 is an index that is representative of the large capitalization
U.S. equity market as a whole. The Russell 2000 is an index that is
representative of the small capitalization U.S. equity market as a whole.
Neither index can be invested in directly.
2
<PAGE> 104
ble interest rates and continued low inflation generally provide a favorable
climate for the stock and bond markets. However, diligence must be maintained in
watching for indicators, such as higher labor costs or declining corporate
profits, that may play havoc with the market. Investors should continue to
review their portfolios, bearing in mind the importance of diversification in
controlling risk. We see the most value in equities characterized by growth at
reasonable P/E multiples, and find relative value in intermediate-term bonds,
rather than long duration plays. Investors seeking long-term growth after
inflation and taxes should remain biased toward stocks and positive on bonds.
Sincerely,
/s/ KIRK D. HARTMAN
Kirk Hartman
Chief Investment Officer
Bank of America NT&SA
Investment Advisor to the
Pacific Horizon Funds
3
<PAGE> 105
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- 57.5%
AEROSPACE/AIRLINES -- 0.9%
AMR Corporation**................................................. 4,800 $ 483,600
Boeing Co......................................................... 29,700 1,616,794
------------
2,100,394
------------
ALUMINUM -- 0.3%
Aluminum Company of America....................................... 7,500 616,875
------------
AUTOMOBILES -- 0.8%
Ford Motor Co. ................................................... 20,900 898,700
General Motors Corp. ............................................. 16,600 1,041,650
------------
1,940,350
------------
BANKS -- 3.8%
Banc One Corp. ................................................... 45,400 2,434,575
Chase Manhattan Corp. ............................................ 16,900 1,879,069
Citicorp.......................................................... 14,300 1,825,037
U.S.Bancorp....................................................... 10,192 892,437
Wells Fargo & Co. ................................................ 6,400 1,627,200
------------
8,658,318
------------
BEVERAGES -- 1.0%
Coca-Cola Co. .................................................... 39,600 2,269,575
------------
BUILDING MATERIALS -- 0.3%
Masco Corp ....................................................... 15,700 697,669
------------
CHEMICALS -- 1.6%
E.I. Du Pont De Nemours & Co. .................................... 20,200 1,258,712
Monsanto Corp. ................................................... 34,700 1,524,631
Praxair, Inc. .................................................... 15,800 844,312
------------
3,627,655
------------
COMPUTER SOFTWARE/HARDWARE -- 3.0%
IBM............................................................... 13,800 1,392,075
Microsoft Corp. .................................................. 31,400 4,150,688
Seagate Technology, Inc.**........................................ 34,700 1,325,106
------------
6,867,869
------------
CONTAINERS & PACKAGING -- 0.2%
Bemis Co., Inc. .................................................. 9,300 408,619
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
4
<PAGE> 106
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
COSMETICS/HOUSEHOLD PRODUCTS -- 2.1%
Colgate-Palmolive Co. ............................................ 7,600 $ 476,900
Gillette Co. ..................................................... 16,000 1,325,000
Newell Co. ....................................................... 19,600 771,750
Procter & Gamble Co. ............................................. 16,000 2,129,000
------------
4,702,650
------------
ELECTRONIC PRODUCTS -- 2.2%
General Electric Co. ............................................. 79,200 4,950,000
------------
ELECTRONIC SEMICONDUCTORS -- 2.6%
Intel Corp. ...................................................... 49,400 4,550,975
National Semiconductor Corp.**.................................... 41,900 1,435,075
------------
5,986,050
------------
FINANCIAL SERVICES -- 4.4%
American Express.................................................. 25,700 1,998,175
First Data Corp. ................................................. 57,500 2,361,094
Household International, Inc. .................................... 23,900 2,651,406
Morgan Stanley Group, Inc. ....................................... 63,600 3,060,750
------------
10,071,425
------------
FOOD -- 2.1%
Archer Daniels Midland Co......................................... 40,845 883,273
Kellogg Co. ...................................................... 19,600 877,100
Pioneer Hi-Bred International, Inc. .............................. 8,900 762,619
Ralston Purina Group.............................................. 9,800 882,000
Sara Lee Corp. ................................................... 20,300 817,075
W.M. Wrigley Jr., Co. ............................................ 7,400 536,500
------------
4,758,567
------------
GAS UTILITIES -- 0.8%
Columbia Gas System, Inc. ........................................ 27,400 1,808,400
------------
HOSPITAL CARE -- 0.7%
Abbott Laboratories............................................... 8,800 527,450
Becton Dickinson & Co. ........................................... 11,500 551,281
Johnson & Johnson Co. ............................................ 8,600 487,512
------------
1,566,243
------------
HOTELS & MOTELS -- 0.8%
HFS, Inc.**....................................................... 24,200 1,347,637
ITT Corp.**....................................................... 8,200 515,062
------------
1,862,699
------------
INSURANCE-PROPERTY & CASUALTY -- 1.0%
American International Group, Inc................................. 6,900 651,187
Chubb Corp. ...................................................... 23,800 1,591,625
------------
2,242,812
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
5
<PAGE> 107
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
LEISURE -- 0.7%
Disney (Walt) Co.................................................. 12,400 $ 952,475
Hilton Hotels Corp. .............................................. 10,700 328,356
Mattel, Inc. ..................................................... 9,300 310,969
------------
1,591,800
------------
MANUFACTURING-MACHINERY -- 1.2%
General Signal Corp. ............................................. 29,400 1,275,225
Illinois Tool Works, Inc. ........................................ 29,300 1,417,387
------------
2,692,612
------------
MEDIA -- 0.9%
ACNielsen Corp.**................................................. 1 23
Gannett, Inc. .................................................... 3,200 311,800
McGraw Hill Companies............................................. 5,900 361,744
Time Warner, Inc. ................................................ 13,000 669,500
Tribune Co. ...................................................... 13,000 642,687
------------
1,985,754
------------
MEDICAL SUPPLIES & EQUIPMENT -- 0.7%
Boston Scientific Corp.**......................................... 3,700 260,850
Guidant Corp. .................................................... 8,700 763,969
U.S. Surgical Corp. .............................................. 18,600 612,637
------------
1,637,456
------------
MULTI-INDUSTRY -- 2.1%
Corning Glass, Inc................................................ 18,200 962,325
Tenneco, Inc.**................................................... 30,200 1,466,587
Tyco International Ltd. .......................................... 29,500 2,313,906
------------
4,742,818
------------
NATURAL ENERGY -- 1.0%
Coastal Corp. .................................................... 17,100 987,525
Consolidated Natural Gas Co. ..................................... 22,000 1,299,375
------------
2,286,900
------------
OIL DOMESTIC & CRUDE -- 0.5%
Pennzoil Co....................................................... 14,300 1,103,781
------------
OIL INTERNATIONAL -- 2.9%
Chevron Corp. .................................................... 10,500 813,094
Exxon Corp. ...................................................... 33,500 2,049,781
Mobil Corp. ...................................................... 15,800 1,149,450
Texaco, Inc. ..................................................... 7,700 887,425
Williams Cos., Inc. .............................................. 22,600 1,052,312
USX Marathon Corp. ............................................... 20,600 670,788
------------
6,622,850
------------
OIL SERVICE -- 0.9%
Halliburton Co. .................................................. 21,800 1,040,950
Schlumberger, Ltd. ............................................... 11,800 899,012
------------
1,939,962
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
6
<PAGE> 108
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
PAPER PRODUCTS -- 1.9%
Champion International Corp. ..................................... 10,900 $ 645,144
Ikon Office Solutions, Inc. ...................................... 51,100 1,328,600
International Paper Co. +......................................... 16,200 854,550
Kimberly-Clark Corp. ............................................. 15,100 716,306
Mead Corp. ....................................................... 11,200 794,500
------------
4,339,100
------------
PHARMACEUTICALS -- 5.8%
American Home Products Corp....................................... 22,800 1,641,600
Amgen, Inc.**..................................................... 10,800 535,275
Bristol-Meyers Squibb Co. ........................................ 31,200 2,371,200
Lilly, (Eli) & Co. ............................................... 14,700 1,537,987
Medtronic, Inc. .................................................. 8,800 795,300
Merck & Co., Inc. ................................................ 26,300 2,414,669
Pfizer, Inc. ..................................................... 32,600 1,805,225
Schering-Plough Corp. ............................................ 17,800 854,400
Warner Lambert Co. ............................................... 9,100 1,156,269
------------
13,111,925
------------
PHOTOGRAPHY -- 0.2%
Eastman Kodak Co. ................................................ 5,900 385,713
------------
RAILROADS -- 0.7%
Burlington Northern Santa Fe...................................... 6,200 568,463
Caliber Systems, Inc. ............................................ 14,500 605,375
Union Pacific Corp. .............................................. 6,500 422,094
------------
1,595,932
------------
RESTAURANTS -- 0.4%
McDonald's Corp. ................................................. 18,000 851,625
------------
RETAIL -- 2.2%
CVS Corp. ........................................................ 18,000 1,014,750
Home Depot, Inc. ................................................. 22,500 1,061,719
Nordstrom, Inc. .................................................. 16,300 953,550
Wal-Mart Stores, Inc. ............................................ 54,800 1,945,400
------------
4,975,419
------------
RETAIL-MANUFACTURING -- 0.4%
Costco Companies, Inc............................................. 23,500 847,469
------------
TELECOMMUNICATIONS -- 2.7%
3 Com Corp. **.................................................... 33,000 1,647,937
Cisco Systems, Inc.**............................................. 31,700 2,389,388
Motorola, Inc. ................................................... 29,400 2,157,225
------------
6,194,550
------------
TELEPHONE -- 2.6%
Bell Atlantic Corp. .............................................. 13,440 972,720
GTE Corp. ........................................................ 31,800 1,417,088
MCI Communications Corp. ......................................... 46,200 1,316,700
WorldCom, Inc.**.................................................. 74,000 2,215,375
------------
5,921,883
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
7
<PAGE> 109
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
TOBACCO -- 1.1%
Philip Morris Cos., Inc. ......................................... 57,350 $ 2,501,894
------------
TOTAL COMMON STOCK
(COST $101,837,099)............................................... 130,465,613
------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS
S&P/MOODY'S MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ------------ ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
CORPORATE OBLIGATIONS -- 13.9%
CORPORATE BONDS -- 10.4%
AESOP Funding II Series 1997-1,
Class A1...................... AAA/Aaa 6.22% 10/20/01 $1,000,000 $ 998,907
Citibank Credit Card Master
Trust, ZCB.................... AAA/Aaa 0.00% 02/07/03 3,500,000 2,782,509
Citibank Credit Card Master
Trust I, ZCB.................. NR/Aaa 0.00% 08/15/06 2,000,000 1,247,730
Finova Capital Corp............. A-/Baa1 6.63% 09/15/01 3,500,000 3,482,500
First Union Corp................ A-/A2 6.55% 10/15/05 3,600,000 3,532,500
Ford Motor Credit Co............ A+/A1 5.75% 01/25/01 2,500,000 2,443,750
General Motors Acceptance
Corp.......................... A-/A3 7.13% 05/01/01 2,000,000 2,032,500
General Motors Acceptance
Corp.......................... A-/A3 6.88% 07/15/01 2,000,000 2,017,500
Sears Roebuck Acceptance Corp... A-/A2 7.00% 06/15/07 1,500,000 1,501,875
The Money Storetrust 1996-B..... AAA/Aaa 7.38% 05/15/17 3,500,000 3,567,276
------------
23,607,047
------------
MEDIUM TERM NOTES -- 3.5%
Bear Stearns.................... A2/A 6.50% 07/05/00 1,500,000 1,501,875
Chrysler Financial Corp......... A3/A- 5.63% 02/16/01 2,500,000 2,428,125
Fuji Bank....................... A3/NR 7.30% 03/29/49 1,500,000 1,509,109
PaineWebber Group............... BBB+/Baa1 7.02% 02/10/04 2,500,000 2,484,375
------------
7,923,484
------------
TOTAL CORPORATE OBLIGATIONS
(COST $31,295,447).............. 31,530,531
------------
U.S. GOVERNMENT OBLIGATIONS -- 8.6%
U.S. TREASURY BONDS -- 5.5%
U.S. Treasury Bond.............. 10.38%* 11/15/12 6,100,000 7,816,783
U.S. Treasury Bond.............. 8.13%* 08/15/21 4,000,000 4,672,520
------------
12,489,303
U.S. TREASURY NOTES -- 3.1%
U.S. Treasury Note.............. 6.25%* 02/15/07 7,100,000 7,015,580
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(COST $19,321,287)............ 19,504,883
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
8
<PAGE> 110
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ----- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 14.8%
Federal Home Loan Mortgage
Corporation Pool #G10304...... 6.50% 04/01/09 $ 778,164 $ 771,112
Federal Home Loan Mortgage
Corporation Pool #E60891...... 6.50% 07/01/10 2,842,654 2,816,893
Federal Home Loan Mortgage
Corporation Pool #297505...... 8.00% 06/01/17 11,936 12,424
Federal Home Loan Mortgage
Corporation Pool #533301...... 10.50% 04/01/19 24,584 27,142
Federal Home Loan Mortgage
Corporation Pool #544066...... 8.00% 12/01/19 9,614 9,971
FNCL Pool #325602............... 6.50% 10/01/10 496,238 491,430
FNCL Pool #313349............... 10.00% 01/01/27 1,276,365 1,390,042
Federal National Mortgage
Association Pool #1997-M5
Cl-C.......................... 6.74% 08/25/07 2,000,000 2,009,373
Federal National Mortgage
Association Pool #251116...... 8.00% 07/27/27 7,370,200 7,568,274
Government National Mortgage
Association Pool #146301...... 10.00% 02/15/16 81,890 90,206
GNSF Pool #278853............... 9.00% 11/15/19 304,237 328,006
GNSF Pool #276635............... 9.00% 12/15/19 233,202 251,421
GNSF Pool #780330............... 9.00% 12/15/19 1,216,634 1,305,600
GNSF Pool #283578............... 8.00% 01/15/20 75,287 78,440
GNSF Pool #231236............... 9.00% 01/15/20 234,199 252,496
GNSF Pool #258039............... 9.00% 01/15/20 225,154 242,744
GNSF Pool #234214............... 8.00% 03/15/20 99,003 103,149
GNSF Pool #318567............... 8.00% 01/15/22 14,342 14,861
GNSF Pool #317257............... 8.00% 02/15/22 13,551 14,029
GNSF Pool #312656............... 8.00% 02/15/22 436,628 452,183
GNSF Pool #316108............... 8.00% 03/15/22 444,327 460,017
GNSF Pool #316859............... 8.00% 03/15/22 728,299 753,790
GNSF Pool #311456............... 8.00% 04/15/22 495,950 513,153
GNSF Pool #321799............... 8.00% 04/15/22 381,408 394,639
GNSF Pool #323085............... 8.00% 05/15/22 860,319 890,162
GNSF Pool #373336............... 7.50% 05/15/22 659,662 668,938
GNSF Pool #350519............... 7.00% 06/15/23 17,605 17,490
GNSF Pool #373346............... 7.50% 06/15/22 760,065 770,754
GNSF Pool #388995............... 7.50% 07/15/22 826,999 838,629
GNSF Pool #389002............... 7.50% 08/15/22 620,592 629,319
GNSF Pool #342065............... 8.00% 11/15/22 301,841 311,933
GNSF Pool #295283............... 7.50% 11/15/22 882,581 895,268
GNSF Pool #780227............... 8.00% 12/15/22 180,925 186,692
GNSF Pool #326465............... 7.00% 11/15/23 1,013,059 1,006,411
GNSF Pool #369671............... 7.00% 12/15/23 2,132,316 2,118,322
GNSF Pool #371045............... 8.00% 02/15/24 261,217 269,869
FGLMC Pool #D66935.............. 7.50% 01/01/26 357,923 362,061
FGLMC Pool #D66969.............. 7.50% 01/01/26 813,508 823,931
FGLMC Pool #D68671.............. 7.50% 02/01/26 551,507 557,884
FGLMC Pool #D70402.............. 7.50% 03/01/26 96,822 98,093
FGLMC Pool #D69671.............. 7.50% 03/01/26 30,348 30,728
FGLMC Pool #D69839.............. 7.50% 04/01/26 458,268 463,996
FGLMC Pool #D69930.............. 7.50% 04/01/26 438,241 443,719
FGLMC Pool #D70086.............. 7.50% 04/01/26 510,248 516,626
FGLMC Pool #D71116.............. 7.50% 05/01/26 96,875 98,086
FGLMC Pool #D71404.............. 7.50% 05/01/26 1,257,210 1,272,925
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(COST $33,369,770).............. 33,623,231
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
9
<PAGE> 111
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- --------------------------------- ------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 3.2%
BHP Finance +................... 6.42% 03/01/26 $4,000,000 $ 3,955,000
National Westminster Bank,
PLC........................... 9.45% 05/01/01 3,000,000 3,277,500
------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $7,116,612)............... 7,232,500
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------
<S> <C> <C>
TEMPORARY INVESTMENTS -- 1.7%
Temporary Investment Cash Fund.................................... 1,938,051 1,938,051
Temporary Investment Fund......................................... 1,938,051 1,938,051
------------
TOTAL TEMPORARY INVESTMENTS
(COST $3,876,102)................................................. 3,876,102
------------
TOTAL INVESTMENTS -- 99.7%
(COST $196,816,317)(A)............................................ 226,232,860
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%...................... 764,984
------------
NET ASSETS -- 100.0%............................................... $226,997,844
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $226,997,844.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................. $31,246,990
Unrealized depreciation................................. (1,830,447)
-----------
Net unrealized appreciation............................. $29,416,543
=============
</TABLE>
(ZCB) -- Zero Coupon Bond.
* Effective Yield.
** Non-income producing security.
+ Foreign Issuer.
See Notes to Financial Statements.
10
<PAGE> 112
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (cost $196,816,317).......................... $226,232,860
Interest and dividends receivable............................................... 1,361,543
Receivable for capital shares sold.............................................. 262,062
Receivable for investment securities sold....................................... 4,233,696
Deferred organization costs..................................................... 946
Prepaid expenses................................................................ 6,360
------------
Total Assets..................................................................... 232,097,467
------------
LIABILITIES:
Payable for capital shares redeemed............................................. 146,130
Payable for investment securities purchased..................................... 4,603,405
Investment advisory fees payable................................................ 72,161
Administration fees payable..................................................... 58,997
Shareholder service fees payable (A and K Shares)............................... 78,922
12b-1 fees payable (K Shares)................................................... 374
Transfer agent fees payable..................................................... 17,811
Other accrued expenses.......................................................... 121,823
------------
Total Liabilities................................................................ 5,099,623
------------
NET ASSETS....................................................................... $226,997,844
============
Net Assets:
A Shares........................................................................ $ 40,862,581
K Shares........................................................................ 866,502
SRF Shares...................................................................... 185,268,761
------------
Total............................................................................ $226,997,844
============
Shares Outstanding ($0.001 par value, 400 million shares authorized):
A Shares........................................................................ 2,015,318
K Shares........................................................................ 42,765
SRF Shares...................................................................... 11,598,114
------------
Total............................................................................ 13,656,197
============
NET ASSET VALUE
A Shares -- redemption price per share.......................................... $ 20.28
============
Maximum Sales Charge (A Shares)................................................. 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares / (100%-Maximum
Sales Charge))................................................................ $ 21.24
============
K Shares -- offering and redemption price per share............................. $ 20.26
============
SRF Shares -- offering and redemption price per share........................... $ 15.97
============
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................................. $ 13,656
Additional paid-in capital...................................................... 191,213,624
Distributions in excess of net investment income................................ (303,679)
Accumulated net realized gains on investment transactions....................... 6,657,700
Net unrealized appreciation on investments...................................... 29,416,543
------------
NET ASSETS, AUGUST 31, 1997...................................................... $226,997,844
============
</TABLE>
- ---------------
See Notes to Financial Statements.
11
<PAGE> 113
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I -- Asset Allocation
Portfolio (a):
Interest income................................................................. $ 339,911
Dividend income................................................................. 98,956
------------
438,867
------------
Expenses........................................................................ 30,161
Less: Fee waivers and expense reimbursements.................................... (2,355)
------------
27,806
------------
Net Investment Income from Master Investment Trust,
Series I -- Asset Allocation Portfolio.......................................... 411,061
Interest income................................................................. 1,268,273
Dividend income................................................................. 360,455
------------
Total Income..................................................................... 2,039,789
------------
EXPENSES:
Advisory fees................................................................... 176,810
Administration fees............................................................. 84,875
Administrative and Shareholder service fees (K Shares).......................... 1,027
Shareholder service fees (A Shares)............................................. 48,020
Shareholder service fees (SRF Shares)........................................... 90,661
12b-1 fees (K Shares)........................................................... 2,059
Accounting fees................................................................. 28,692
Custodian fees.................................................................. 2,774
Transfer Agent fees............................................................. 39,410
Registration fees............................................................... 22,960
Reports to shareholders......................................................... 29,778
Amortization of organization costs.............................................. 12,880
Audit fees...................................................................... 8,172
Legal fees...................................................................... 1,086
Directors' fees................................................................. 1,260
Other expenses.................................................................. 2,900
------------
Total Expenses................................................................ 553,364
Less: Fee waivers and expense reimbursements..................................... (17,925)
------------
Total Net Expenses.............................................................. 535,439
------------
NET INVESTMENT INCOME............................................................ 1,504,350
------------
REALIZED / UNREALIZED GAINS ON INVESTMENTS (a):
Net realized gains on investment transactions................................... 9,506,400
Net change in unrealized appreciation on investments............................ 26,567,078
------------
Net realized / unrealized gains on investments................................... 36,073,478
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................. $ 37,577,828
============
</TABLE>
- ---------------
(a) On June 23, 1997, the Asset Allocation Fund withdrew its investment in the
Master Investment Trust, Series I and invested directly in investment
securities.
See Notes to Financial Statements.
12
<PAGE> 114
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income....................................... $ 1,504,350 $ 712,729
Net realized gain on investment transactions................ 9,506,400 2,440,559
Net change in unrealized appreciation on investments........ 26,567,078 1,517,990
------------ ------------
Change in net assets resulting from operations.............. 37,577,828 4,671,278
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares.................................................. (418,386) (682,373)
K Shares.................................................. (7,432) (3,691) (a)
SRF Shares (b)............................................ (1,519,657) --
Net realized gains from investment transactions
A Shares.................................................. (1,684,638) (998,763)
K Shares.................................................. (38,229) (15,739) (a)
SRF Shares (b)............................................ (2,845,904) --
------------ ------------
Change in net assets from shareholder distributions.......... (6,514,246) (1,700,566)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued................................. 167,089,824 15,869,326
Dividends reinvested........................................ 2,046,050 1,651,877
Cost of shares redeemed..................................... (8,787,396) (7,260,804)
------------ ------------
Change in net assets from capital share transactions......... 160,348,478 10,260,399
------------ ------------
Change in net assets......................................... 191,412,060 13,231,111
NET ASSETS
Beginning of Period......................................... 35,585,784 22,354,673
------------ ------------
End of Period (including distributions in excess of $303,679
and undistributed net investment income of $137,447,
respectively.)............................................ $226,997,844 $35,585,784
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) On June 23, 1997, Asset Allocation Fund of the Seafirst Retirement Funds
withdrew its investment in Master Investment Trust, Series I and merged its
assets with the Asset Allocation Fund creating a new class of SRF Shares on
that date.
See Notes to Financial Statements.
13
<PAGE> 115
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I -- Blue Chip
Portfolio, at value............................................. $538,657,972
Prepaid expenses.................................................. 35,671
------------
Total Assets........................................................ 538,693,643
------------
LIABILITIES:
Dividend payable.................................................. 4,020
Administration fees............................................... 69,781
Transfer agent fees payable....................................... 47,718
Shareholder service fees payable (A, K and SRF Shares)............ 55,144
Audit fees payable................................................ 12,242
Fund accounting fees and expense payable.......................... 11,919
Legal fees payable................................................ 18,438
Other accrued expenses............................................ 91,342
------------
Total Liabilities................................................... 310,604
------------
NET ASSETS.......................................................... $538,383,039
============
Net Assets
A Shares.......................................................... $216,029,073
K Shares.......................................................... 3,066,143
SRF Shares........................................................ 319,287,823
------------
Total............................................................... $538,383,039
============
Shares Outstanding ($0.001 par value, 300 million shares
authorized):
A Shares.......................................................... 8,002,386
K Shares.......................................................... 113,795
SRF Shares........................................................ 13,226,292
------------
Total............................................................... 21,342,473
============
NET ASSET VALUE:
A Shares -- redemption price per share............................ $27.00
Maximum Sales Charge (A Shares)................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge))................................. $28.27
============
K Shares -- offering and redemption price per share............... $26.94
============
SRF Shares -- offering and redemption price per share............. $24.14
============
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................... $ 21,342
Additional paid-in capital........................................ 416,754,130
Distributions in excess of net investment income.................. (181,737)
Accumulated net realized gains on investment transactions......... 22,587,253
Net unrealized appreciation on investments........................ 99,202,051
------------
NET ASSETS, AUGUST 31, 1997......................................... $538,383,039
============
</TABLE>
- ---------------
See Notes to Financial Statements.
14
<PAGE> 116
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I --
Investment Grade Bond Portfolio, at value........................... $71,907,385
Deferred organization costs and prepaid expenses...................... 2,410
-----------
Total Assets............................................................ 71,909,795
-----------
LIABILITIES:
Reports to shareholders expenses payable.............................. 46,269
Fund accounting fees and expenses payable............................. 9,218
Audit fees payable.................................................... 7,622
Transfer agent fees payable........................................... 11,839
Other accrued expenses................................................ 30,216
-----------
Total Liabilities....................................................... 105,164
-----------
NET ASSETS.............................................................. $71,804,631
===========
Net Assets:
A Shares.............................................................. $35,305,694
K Shares.............................................................. 415,143
SRF Shares............................................................ 36,083,794
-----------
Total................................................................... $71,804,631
===========
Shares Outstanding ($0.001 par value, and 300 million shares
authorized):
A Shares.............................................................. 3,678,885
K Shares.............................................................. 43,280
SRF Shares............................................................ 3,359,281
-----------
Total................................................................... 7,081,446
===========
NET ASSET VALUE
A Shares -- redemption price per share................................ $9.60
===========
Maximum Sales Charge (A Shares)....................................... 4.50%
Maximum Offering Price (A Shares) (Net Asset Value of A Shares/
(100% -- Maximum Sales Charge))..................................... $10.05
===========
K Shares -- offering and redemption price per share................... $9.59
===========
SRF Shares -- offering and redemption price per share................. $10.74
===========
COMPOSITION OF NET ASSETS:
Shares of common stock, at par........................................ $ 7,081
Additional paid-in capital............................................ 74,309,647
Distributions in excess of net investment income...................... (10,633)
Accumulated net realized losses on investment transactions............ (2,803,251)
Net unrealized depreciation on investments............................ 301,787
-----------
NET ASSETS, AUGUST 31, 1997............................................. $71,804,631
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 117
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I -- Blue
Chip Portfolio:
Dividend income................................................ $ 2,668,734
Interest income................................................ 254,784
------------
2,923,518
Expenses....................................................... 1,039,153
------------
Net Investment Income from Master Investment Trust, Series I -- Blue
Chip Portfolio..................................................... 1,884,365
------------
EXPENSES:
Shareholder service fees (A Shares)................................ 231,243
Shareholder service fees (K Shares)................................ 2,800
Shareholder service fees (SRF Shares).............................. 155,322
12b-1 fees (K Shares).............................................. 5,598
Administration fees................................................ 233,232
Transfer Agent fees................................................ 136,079
Registration fees.................................................. 23,592
Reports to shareholders............................................ 64,355
Fund accounting fees and expenses.................................. 30,564
Amortization of organization costs................................. 14,168
Audit fees......................................................... 3,570
Legal fees......................................................... 6,271
Directors' fees.................................................... 2,291
Other expenses..................................................... 39,446
------------
Total Expenses............................................... 948,531
Less: Fee waivers and expense reimbursements......................... (221,475)
------------
Total Net Expenses................................................. 727,056
------------
NET INVESTMENT INCOME................................................ 1,157,309
------------
REALIZED/UNREALIZED GAINS ON INVESTMENTS FROM INVESTMENT TRUST,
SERIES I -- BLUE CHIP PORTFOLIO:
Net realized gains on investment transactions.................... 32,224,675
Net change in unrealized appreciation on investments............. 80,612,767
------------
Net realized/unrealized gains on investments from Master Investment
Trust, Series I -- Blue Chip Portfolio............................. 112,837,442
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $113,994,751
============
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 118
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series I --
Investment Grade Bond Portfolio:
Interest Income................................................... $ 1,403,839
-----------
Expenses.......................................................... 73,190
Less: Fee waivers and expense reimbursements...................... (42,931)
-----------
30,259
-----------
Net Investment Income from Master Investment Trust,
Series I -- Investment Grade Bond Portfolio....................... 1,373,580
-----------
EXPENSES:
Registration fees................................................. 25,769
Shareholder service fees (A Shares)............................... 36,384
Shareholder service fees (K Shares)............................... 465
Shareholder service fees (SRF Shares)............................. 17,401(a)
12b-1 fees (K Shares)............................................. 938
Administration fees............................................... 32,369
Transfer Agent fees............................................... 22,010
Fund accounting fees and expenses................................. 28,650
Reports to shareholders........................................... 33,866
Amortization of organization costs................................ 15,088
Audit fees........................................................ 6,982
Legal fees........................................................ 718
Directors fees.................................................... 285
Other operating expenses.......................................... 3,103
-----------
Total Expenses.............................................. 224,028
Less: Fee waivers and reimbursements................................ (64,175)
-----------
Total Net Expenses.................................................. 159,853
-----------
NET INVESTMENT INCOME............................................... 1,213,727
-----------
REALIZED / UNREALIZED GAINS (LOSSES) ON INVESTMENTS FROM MASTER
INVESTMENT TRUST, SERIES I -- INVESTMENT GRADE BOND PORTFOLIO
Net realized losses on investment transactions.................... (2,642,763)
Net change in unrealized depreciation on investments.............. 429,712
-----------
Net realized / unrealized losses on investments from Master
Investment Trust Series I -- Investment Grade Bond Portfolio...... (2,213,051)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ (999,324)
===========
</TABLE>
(a) Seafirst Retirement Funds were reorganized into the Pacific Horizon Funds on
June 23, 1997, creating the SRF Shares.
- ---------------
See Notes to Financial Statements.
17
<PAGE> 119
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income........................ $ 1,157,309 $ 1,022,481
Net realized gains on investment
transactions............................... 32,224,675 14,059,189
Net change in unrealized appreciation on
investments................................ 80,612,767 12,101,556
------------ ------------
Change in net assets resulting from
operations................................. 113,994,751 27,183,226
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares............................... (556,688) (980,276)
K Shares............................... (2,671) (998)(a)
SRF Shares (b)......................... (957,833) --
Net realized gains from investment
transactions:
A Shares............................... (11,977,846) (2,731,645)
K Shares............................... (149,419) (8,357)(a)
SRF Shares (b)......................... (9,569,624) --
------------ ------------
Change in net assets from shareholder
distributions................................ (23,214,081) (3,721,276)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................. 315,283,391 87,766,406
Dividends reinvested......................... 11,058,303 3,417,983
Cost of shares redeemed...................... (32,940,898) (27,378,220)
------------ ------------
Change in net assets from capital share
transactions................................. 293,400,796 63,806,169
------------ ------------
Change in net assets........................... 384,181,466 87,268,119
NET ASSETS:
Beginning of Period.......................... 154,201,573 66,933,454
------------ ------------
End of Period (including distributions in
excess of $181,737 and undistributed net
investment income of $178,145,
respectively.)............................. $538,383,039 $ 154,201,573
============ ============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
See Notes to Financial Statements.
18
<PAGE> 120
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997(a)
---------------- --------------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.......................... $ 1,213,727 $ 878,883
Net realized loss on investment transactions... (2,642,763) (159,361)
Net change in unrealized depreciation on
investments.................................. 429,712 (86,639)
---------------- --------------------
Change in net assets resulting from
operation.................................... (999,324) 632,883
---------------- --------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Shares..................................... (826,193) (874,813)
K Shares..................................... (9,753) (4,070)(a)
SRF Shares (b)............................... (392,509) --
Net realized gains from investment
transactions:
A Shares..................................... -- (93,821)
K Shares..................................... -- (7)(a)
SRF Shares (b)............................... -- --
---------------- --------------------
Change in net assets from shareholder
distributions.................................. (1,228,455) (972,711)
---------------- --------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.................... 57,743,694 16,917,463
Dividends reinvested........................... 669,060 488,201
Cost of shares redeemed........................ (7,649,365) (6,976,214)
---------------- --------------------
Change in net assets from capital share
transactions................................... 50,763,389 10,429,450
---------------- --------------------
Change in net assets............................. 48,535,610 10,089,622
NET ASSETS
Beginning of Period............................ 23,269,021 13,179,399
---------------- --------------------
End of Period (including distributions in
excess of $10,633 and undistributed net
investment income of $4,095, respectively)... $ 71,804,631 $ 23,269,021
============== ==================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) On June 23, 1997, Bond Fund of Seafirst Retirement Funds withdrew its
investments in Master Investment Trust Series I and merged its assets with
the Intermediate Bond Fund creating a new class of SRF Shares on that date.
See Notes to Financial Statements.
19
<PAGE> 121
PACIFIC HORIZON FUNDS, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Asset Allocation
Fund (the "Asset Allocation Fund"), Pacific Horizon Blue Chip Fund (the "Blue
Chip Fund"), and Pacific Horizon Intermediate Bond Fund (the "Intermediate Bond
Fund"), collectively the "Funds" individually the "Fund". The Funds offer A
Shares and effective July 22, 1996, began offering K Shares. On June 23, 1997,
the Asset Allocations Fund, Blue Chip Fund, and Bond Fund of the Seafirst
Retirement Funds merged into the Pacific Horizon Asset Allocation Fund, Pacific
Horizon Blue Chip Fund and Pacific Horizon Intermediate Bond Fund, respectively,
and the Pacific Horizon Asset Allocation Fund, Pacific Horizon Blue Chip Fund
and Pacific Horizon Intermediate Bond Fund began offering SRF Shares. A Shares
and SRF Shares have a Shareholder Services Plan while K Shares have a
Distribution Plan and Administrative and Shareholder Services Plan.
The Asset Allocation Fund seeks to obtain long term growth from Capital
Appreciation, dividend and interest income. The Asset Allocation Fund seeks to
achieve its objective by actively allocating investments among the three major
asset categories, Bonds, equity securities and cash equivalents. The Blue Chip
Fund and the Intermediate Bond Fund seeks to achieve its investment objective by
investing substantially all of its assets in the Blue Chip Portfolio and the
Investment Grade Bond Portfolio, respectively (individually the "Portfolio"
collectively the "Portfolios") of the Master Investment Trust -- Series I (the
"Trust") an open-ended management company that has the same investment
objectives as that of the Blue Chip Fund and the Intermediate Bond Fund. At
August 31, 1997, the Blue Chip Fund, and the Intermediate Bond Fund held the
proportionate interests in the corresponding Portfolios in the following
amounts:
Blue Chip Fund.................................................90.7%
Bond Fund......................................................58.9%
The financial statements of each Portfolio, including its portfolio of
investments, are included elsewhere within this report and should be read in
conjunction with the Blue Chip Fund's and the Intermediate Bond Fund's financial
statements.
Prior to June 23, 1997, the Asset Allocation Fund sought to achieve its
investment objective by investing substantially all of its assets in the Asset
Allocation Portfolio of the Trust, which had the same investment objective as
that of the Fund. Effective June 23, 1997, the Fund
20
<PAGE> 122
withdrew its investment in the Asset Allocation Portfolio and began investing
its assets directly in securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Asset Allocation Fund's
investment adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned
subsidiary BISYS Fund Services, Limited Partnership, served as the Funds'
administrator through September 15, 1997. Concord Financial Group, Inc. (the
"Distributor"), an indirect, wholly-owned subsidiary of BISYS served as the
distributor of the Funds' shares through September 15, 1997. BISYS Fund
Services, Inc. ("BISYS Ohio"), also a wholly-owned subsidiary of BISYS served as
transfer agent and dividend disbursing agent of the Funds through October 24,
1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc.("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Funds, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Funds' prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
Furthermore, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with PFPC under which PFPC has
agreed to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the funds.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Funds' transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make esti-
21
<PAGE> 123
mates and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those of estimates.
PORTFOLIO VALUATIONS:
The Asset Allocation Fund values portfolio securities (other than debt
securities with remaining maturities of 60 days or less) at the last reported
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the NASDAQ National Securities Market.
Securities not listed on an exchange or the NASDAQ National Securities Market or
securities for which there were no transactions are valued at the mean between
the current quoted bid and ask prices on the date of the valuation. Bid price is
used when no ask price is available. The Fund may also use an independent
pricing service, approved by the Board of Directors, to value certain of their
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
Directors. Debt securities with remaining maturities of 60 days or less are
valued at amortized cost.
The valuation of securities of the Blue Chip Fund's and Intermediate Bond
Fund's investments in the Portfolios are discussed in Note 2 of the Portfolios.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recognized on the ex-dividend date. Realized gains and
losses from security transactions are recorded on an identified cost basis.
The Blue Chip Fund, Intermediate Bond Fund, and prior to June 23, 1997, the
Asset Allocation Fund recorded its share of the investment income, expenses and
realized and unrealized gains and losses recorded by the Portfolio on a daily
basis. The investment income, expenses and realized and unrealized gains and
losses were allocated daily to investors in the Portfolio based upon the value
of their investments in the Portfolio. Such investments were adjusted on a daily
basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
22
<PAGE> 124
The Funds incurred certain costs in connection with its organization. Such
costs have been deferred and are being amortized on a straight line basis over
five years.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Asset Allocation Fund's and Blue Chip Fund's net investment income is
declared and paid as a dividend, quarterly, to shareholders of record at the
close of business on record date. The Intermediate Bond Fund's net investment
income is declared monthly and paid within five business days after the end of
each month as a dividend to shareholders of record. Net realized gains on
portfolio securities, if any, are distributed at least annually. However, to the
extent that net realized gains of the Funds can be offset by capital loss
carryovers of the Funds, such gains will not be distributed. Dividends and
distributions are recorded by the Funds on the ex-dividend date.
The amount of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET REALIZED
NET GAIN/(LOSS)
INVESTMENT ON
INCOME INVESTMENTS
------------- ------------
<S> <C> <C>
Asset Allocation
Fund $(1,681) $ 1,679
Blue Chip Fund -- 72
Intermediate Bond
Fund 4,095 (4,095)
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely, all of its net investment company taxable income and net capital gains
to shareholders. Therefore, no federal income tax provision is required.
At February 28, 1997, the Intermediate Bond Fund had the following net
capital loss carryover of $160,488 expires 2005.
23
<PAGE> 125
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Investment Advisory Agreement with Bank of America and the
Funds had an Administration Agreement with BISYS and a Distribution Agreement
with the Distributor. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee from the Funds, which is accrued
daily and payable monthly, at an annual rate of 0.45% and 0.40% of the Capital
Income Fund and the Asset Allocation Fund, respectively, of average daily net
assets. Pursuant to the terms of the Administration Agreement, BISYS was
entitled to a fee, which is accrued daily and payable monthly, at an annual rate
of 0.15%, of the average daily net assets of the Asset Allocation Fund, Blue
Chip Fund and Intermediate Bond Fund, respectively. For the six months ended
August 31, 1997, BISYS agreed to waive $17,413 and $303 of its fees as
Administrator for the Asset Allocation Fund, and the Blue Chip Fund.
For the six months ended August 31, 1997, the Distributor advised the Funds
that it retained $10,017, $90,494 and $504 from commissions earned on sales of
the Asset Allocation Fund's, Blue Chip Fund's and Intermediate Bond Fund's
shares, respectively. For the same period, Bank of America and its affiliates
advised the Funds that they retained $80,229, $706,924 and $3,950 from
commissions earned on sales of shares of the Asset Allocation Fund, Blue Chip
Fund and Intermediate Bond Fund, respectively.
The Funds have a Shareholder Services Plan (the "Plan") under which each
Fund pays the Distributor for shareholder servicing expenses incurred in
connection with A Shares of each Fund. Under the Plan, payments for shareholder
servicing expenses may not exceed 0.25% of each Fund's average daily net assets
for A Shares. For the six months ended August 31, 1997, Asset Allocation Fund,
Blue Chip Fund and Intermediate Bond Fund, incurred charges of $48,020, $231,243
and $36,384, respectively, pursuant to the Plan. The Funds were advised that of
these amounts, the Distributor retained $3,323, $32,170 and $9,748 from the
Asset Allocation Fund, Blue Chip Fund and Intermediate Bond Fund, respectively,
and affiliates of Bank of America retained $41,559, $194,756 and $3,052,
respectively. The Plan provides that if, in any month, the fees paid to the
Distributor are less than the costs incurred by the Distributor, the excess
costs will be included in future computations of the fee, provided that any
excess cost will not be carried forward beyond the end of the fiscal year in
which such excess costs were incurred.
The Funds have adopted a Distribution Plan and an Administrative and
Shareholder Services Plan (the "Administrative Plan") with respect to K Shares
of the Funds. Under the Distribution Plan, the Funds pay the Distributor for
expenses primarily intended to result in the sale of the Funds' K Shares. Under
the Distribution Plan, payments by the Funds for distribution expenses may not
exceed 0.75% of the average daily net
24
<PAGE> 126
assets of each Fund's K Shares. Payments for distribution expenses under the
Distribution Plan are subject to Rule 12b-1 under the Act. Under the
Administrative Plan, the Funds pay for expenses incurred in connection with
shareholder services provided by the Distributor and payments to Service
Organizations for the provision of support services with respect to beneficial
owners of K Shares. Under the Administrative Plan, payments for shareholder
services and administrative services may not exceed 0.25% and 0.75%,
respectively, of the average daily net assets of each Fund's K Shares. The total
of all payments under the Distribution Plan and the Administrative Plan may not
exceed, in the aggregate, the annual rate of 1.00% of the average daily net
assets of each Fund's K Shares. For the six months ended August 31, 1997, the
Distributor received fees of $1,027, $5,581 and $465 for the Asset Allocation
Fund, Blue Chip Fund and Intermediate Bond Fund, respectively. The Funds were
advised that of these amounts the Distributor retained $929 from the Asset
Allocation Fund. For the same period, shareholder services fees of $98 and $351
were waived by the Asset Allocation Fund and Intermediate Bond Fund,
respectively.
The Funds have a Shareholder Services Plan under which the Funds pay the
Distributor for shareholder servicing expenses incurred in connection with the
SRF shares. Under the Plan, payments for shareholder servicing expenses may not
exceed 0.25% of the Funds' average daily net assets for SRF shares. For the six
months ended August 31, 1997, Asset Allocation Fund, Blue Chip Fund and
Intermediate Bond Fund incurred charges of $90,661, $155,322 and $17,401,
pursuant to the Plan. The Funds were advised that of these amounts the
affiliates of Bank of America retained $90,082, $16,258 and $17,401. For the
same period, shareholder services fees of $579, $139,064 and $5,772 were waived
by The Asset Allocation Fund, Blue Chip Fund and Intermediate Bond Fund.
BISYS Ohio served the Funds as transfer agent and dividend disbursing agent.
In these capacities, BISYS Ohio earned $39,410, $136,079 and $22,010 from the
Asset Allocation Fund, Blue Chip Fund and Intermediate Bond Fund, respectively,
for the six months ended August 31, 1997.
For the six months ended August 31, 1997, the Asset Allocation Fund, Blue
Chip Fund and Intermediate Bond Fund incurred legal charges totaling $1,086,
$6,271 and $718, respectively, which were earned by a law firm, a partner of
which serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the
25
<PAGE> 127
Committee. In addition, the Company's President is entitled to an annual salary
of $20,000 for services as President.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. In addition, the
amount payable each year to a Director who dies or resigns shall be increased by
$1,000 for each year of service that the Director served as Chairman of the
Board. Each Director may receive any benefits payable under the Retirement Plan,
at his or her election, either in one lump sum payment or ten annual
installments. A Director's years of service for the purpose of calculating the
payments described above shall be based upon service as a Director or Chairman
after February 28, 1994. Aggregate costs pursuant to the Retirement Plan
amounted to $1,083, $210 and $70 for the Asset Allocation Fund, Blue Chip Fund
and Intermediate Bond Fund, respectively, for the six months ended August 31,
1997.
NOTE 5 -- SECURITIES TRANSACTIONS
For the six months ended August 31, 1997, the cost of purchases and the
proceeds from sales of Asset Allocation Fund's securities (excluding short-term
investments) amounted to $81,885,812 and $84,330,777, respectively.
26
<PAGE> 128
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of common stock of the Funds are summarized below:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
-----------------------------------------------------
SIX MONTHS ENDED AUGUST
31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ------- -----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued...................................... 308 $ 6,128 825 $ 15,144
Reinvested.................................. 101 2,000 90 1,632
Redeemed.................................... (189) (3,759) (395) (7,251)
------ -------- ------ --------
Net increase................................. 220 $ 4,369 520 $ 9,525
====== ======== ====== ========
K Shares
Issued...................................... 20,947 $ 422,460 37,991 $ 724,963
Reinvested.................................. 2,291 45,662 1,051 19,438
Redeemed.................................... (19,023) (380,905) (491) (9,394)
------ -------- ------ --------
Net increase................................. 4,215 $ 87,217 38,551 (a) $ 735,007(a)
====== ======== ====== ========
SRF Shares (000)(b)
Issued...................................... 11,883 $ 160,540 -- $ --
Reinvested.................................. -- -- -- --
Redeemed.................................... (285) (4,648) -- --
------ -------- ------ --------
Net Increase................................. 11,598 $ 155,892 -- $ --
====== ======== ====== ========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
<TABLE>
<CAPTION>
BLUE CHIP FUND
-----------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ------- -----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued...................................... 2,546 $ 67,284 3,838 $ 86,308
Reinvested.................................. 410 10,906 152 3,409
Redeemed.................................... (1,010) (26,554) (1,193) (27,364)
------- ---------- ------- ----------
Net increase................................. 1,946 $ 51,636 2,797 $ 62,353
======= ========== ======= ==========
K Shares
Issued...................................... 70,314 $1,881,745 57,851 $ 1,458,223
Reinvested.................................. 5,713 152,121 405 9,313
Redeemed.................................... (19,927) (541,316) (561) (13,822)
------- ---------- ------- ----------
Net increase................................. 56,100 $1,492,550 57,695 (a) $ 1,453,714(a)
======= ========== ======= ==========
SRF Shares(000's) (b)
Issued...................................... 13,486 $ 246,713 -- $ --
Reinvested.................................. -- -- -- --
Redeemed.................................... (260) (6,441) -- --
------- ---------- ------- ----------
Net increase................................. 13,226 $ 240,272 -- $ --
======= ========== ======= ==========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
27
<PAGE> 129
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
-----------------------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ------- -----------
<S> <C> <C> <C> <C>
A Shares (000's)
Issued...................................... 1,838 $ 17,554 1,730 $ 16,588
Reinvested.................................. 25 242 51 485
Redeemed.................................... (588) (5,619) (728) (6,976)
------- ---------- ------- ----------
Net increase................................. 1,275 $ 12,177 1,053 $ 10,097
======= ========== ======= ==========
K Shares
Issued...................................... 23,969 $ 228,806 34,567 $ 329,738
Reinvested.................................. 1,022 11,043 285 2,728
Redeemed.................................... (16,562) (158,684) (1) (1)
------- ---------- ------- ----------
Net increase................................. 8,429 $ 81,165 34,651 (a) $ 332,465(a)
======= ========== ======= ==========
SRF Shares(000's) (b)
Issued...................................... 3,483 $ 39,843 -- $ --
Reinvested.................................. 35 380 -- --
Redeemed.................................... (159) (1,718) -- --
------- ---------- ------- ----------
Net increase................................. 3,359 $ 38,305 -- $ --
======= ========== ======= ==========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from June 23, 1997 (merger date) to August 31, 1997.
28
<PAGE> 130
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------ PERIOD ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(b) 1996 1995 1994(a)
--------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR.............. $ 19.40 $ 17.52 $ 15.15 $14.84 $ 15.00
------- ------- ------- ------ ------
Income from Investment
Operations:
Net investment income.......... 0.25 0.48 0.52 0.48 0.03
Net realized and unrealized
gains (losses) on investment
transactions................. 1.74 2.50 2.86 0.24 (0.19)
------- ------- ------- ------ ------
Total income (loss) from
investment operations.......... 1.99 2.98 3.38 0.72 (0.16)
------- ------- ------- ------ ------
Less Dividends and
Distributions:
Dividends to shareholders from
net investment income........ (0.22) (0.46) (0.53) (0.41) --
Dividends to shareholders from
net realized gains on
investment transactions...... (0.89) (0.64) (0.48) -- --
------- ------- ------- ------ ------
Total Dividends and
Distributions.................. (1.11) (1.10) (1.01) (0.41) --
------- ------- ------- ------ ------
Net change in net asset value
per share...................... 0.88 1.88 2.37 0.31 (0.16)
------- ------- ------- ------ ------
NET ASSET VALUE PER SHARE, END
OF PERIOD...................... $ 20.28 $ 19.40 $ 17.52 $15.15 $ 14.84
======= ======= ======= ====== ======
Total return (excludes sales
charge)........................ 10.43%++ 17.64% 22.80% 5.03% (1.07%)++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)................... $38,075 $ 34,838 $ 22,355 $5,694 $ 666
Ratio of expenses to average
net assets................... 1.12%+ 1.25% 0.62% 0.00% 0.00%+
Ratio of net investment income
(loss) to average
net assets................... 2.62%+ 2.59% 3.49% 4.25% 4.20%+
Ratio of expenses to average
net assets*.................. 1.22%+ 1.94% 2.92% 7.89% 83.95%+
Ratio of net investment income
to average
net assets*.................. 2.52%+ 1.90% 1.19% (3.64%) (79.75% )+
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Annualized.
++ Not annualized.
(a) Period from January 13, 1994 (inception date) to February 28, 1994.
(b) As of July 22, 1996, the Fund designated the existing series of shares as
"A" Shares.
See Notes to Financial Statements.
29
<PAGE> 131
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR..... $ 19.40 $17.23
------ ------
Income from Investment Operations:
Net investment income.......................... 0.21 0.19
Net realized gains/(losses) on investment
transactions................................. 1.72 2.80
------ ------
Total income from investment operations.......... 1.93 2.99
------ ------
Less: Dividends and Distributions:
Dividends to shareholders from net investment
income....................................... (0.18) (0.18)
Distributions to shareholders from net realized
gains on investment transactions............. (0.89) (0.64)
------ ------
Total Dividends and Distributions................ (1.07) (0.82)
------ ------
Net change in net asset value per share.......... 0.86 2.17
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD......... $ 20.26 $19.40
====== ======
Total return..................................... 10.08%++ 17.69%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)......... $ 815 $ 748
Ratio of expenses to average net assets........ 1.63%+ 1.94%+
Ratio of net investment income to average net
assets....................................... 2.11%+ 2.31%+
Ratio of expenses to average net assets*....... 1.73%+ 3.26%+
Ratio of net investment income to average net
assets*...................................... 2.01%+ 0.99%+
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Annualized.
++ Not annualized.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
See Notes to Financial Statements.
30
<PAGE> 132
THIS PAGE INTENTIONALLY LEFT BLANK
31
<PAGE> 133
PACIFIC HORIZON ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
--------------------------
MARCH 1,
JUNE 23, 1997
1997 THROUGH THROUGH YEAR ENDED
AUGUST 31, JUNE 22, ------------------------------------------
1997(c) 1997(b) FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1997(b) 1996(b) 1995(b)
------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR............................. $ 15.79 $ 15.94 $ 14.96 $13.48 $13.94
------ ----- ------ ------ ------
Income from Investment Operations:
Net investment income............... 0.09 1.61 0.45 0.47 0.46
Net realized and unrealized gains
(losses) on investment
transactions...................... 0.09 (0.15) 2.13 2.49 0.12
------ ----- ------ ------ ------
Total income from investment
operations.......................... 0.18 1.46 2.58 2.96 0.58
------ ----- ------ ------ ------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income................. -- (1.61) (0.45) (0.47) (0.46)
Distributions to shareholders from
net realized gains................ -- -- (1.15) (1.01) (0.58)
------ ----- ------ ------ ------
Total Dividends and Distributions.... -- (1.61) (1.60) (1.48) (1.04)
------ ----- ------ ------ ------
Net change in net asset value per
share............................... 0.18 (0.15) 0.98 1.48 (0.46)
------ ----- ------ ------ ------
NET ASSET VALUE PER SHARE, END OF
PERIOD.............................. $ 15.97 $ 15.79 $ 15.94 $14.96 $13.48
====== ===== ====== ====== ======
Total Return......................... 10.51%++ 7.88%++ 18.03% 22.44% 4.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions)........................ $ 185 $ 169 $ 174 $ 158 $ 145
Ratio of expenses to average net
assets............................ 1.00%+ 0.75%+ 0.95% 0.94% 0.78%
Ratio of net investment income
(loss) to average net assets...... 2.92%+ 2.23%+ 2.88% 3.19% 3.40%
Ratio of expenses to average net
assets*........................... 1.00%+ 1.15%+ 1.39% 1.42% 1.38%
Ratio of net investment income to
average net assets*............... 2.92%+ 1.83%+ 2.44% 2.71% 2.80%
Portfolio turnover rate............. 39%++ N/A N/A N/A N/A
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
+ Annualized.
++ Not Annualized.
(a) 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.
32
<PAGE> 134
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
- ------------------------------
DECEMBER 6, JANUARY 1,
1993 1993
THROUGH THROUGH YEAR ENDED
FEBRUARY 28, DECEMBER 5, DECEMBER 31,
1994(b) 1993(a) 1992(a)
- ------------ ------------ ------------
<S> <C> <C>
$13.86 $12.99 $12.75
------ ------ ------
0.05 0.43 0.46
0.08 0.87 0.24
------ ------ ------
0.13 1.30 0.70
------ ------ ------
(0.05) (0.43) (0.46)
-- -- --
------ ------ ------
(0.05) (0.43) (0.46)
------ ------ ------
0.08 0.87 0.24
------ ------ ------
$13.94 $13.86 $12.99
====== ====== ======
0.94%++ 10.15%++ 5.62%
$ 157 $ 150 $ 107
0.95%+ 0.95%+ 0.95%
2.64%+ 3.47%+ 3.68%
1.64%+ 0.95%+ 0.95%
1.95%+ 3.47%+ 3.68%
N/A 79% 171%
</TABLE>
- ---------------
(b) Represents activity of the Fund prior to its reorganization from the
Seafirst Retirement Funds -- Asset Allocation Fund into SRF Shares of the
Fund. Since the operation and organization of the Fund was changed upon
reorganization this activity may not be reflective of activity after the
reorganization.
(c) Date of commencement of operations of SRF Shares of the Fund.
See Notes to Financial Statements.
33
<PAGE> 135
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(a) 1996 1995 1994(b)
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING
OF YEAR.............................. $ 25.22 $20.53 $15.81 $14.97 $15.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................ 0.08 0.23 0.26 0.31 0.02
Net realized and unrealized gains
(losses) on investment
transactions....................... 3.52 5.21 4.96 0.80 (0.05)
-------- -------- -------- -------- --------
Total income (loss) from investment
operations........................... 3.60 5.44 5.22 1.11 (0.03)
-------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income.................. (0.08) (0.22) (0.28) (0.27) --
Dividends to shareholders from net
realized gains on investment
transactions....................... (1.74) (0.53) (0.22) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions..... (1.82) (0.75) (0.50) (0.27) --
-------- -------- -------- -------- --------
Net change in net asset value per
share................................ 1.78 4.69 4.72 0.84 (0.03)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................... $ 27.00 $25.22 $20.53 $15.81 $14.97
======== ======== ======== ======== ========
Total return (excludes sales
charge).............................. 14.42%++ 27.01% 33.39% 7.60% (0.20)%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)......................... $ 216 $ 153 $ 67 $ 6 $ 1
Ratio of expenses to average net
assets............................. 1.24%+ 1.28% 0.83% 0.00% 0.00%+
Ratio of net investment income (loss)
to average net assets.............. 0.67%+ 0.99% 1.63% 2.46% 2.92%+
Ratio of expenses to average net
assets*............................ 1.33%+ 1.71% 2.28% 6.32% 55.00%+
Ratio of net investment income to
average net assets*................ 0.58%+ 0.56% 0.18% (3.86)% (52.08)%+
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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.
+ Annualized.
++ Not annualized.
(a) As of July 22, 1996, the Fund designated the existing series of shares as "A" Shares.
(b) Period from January 13, 1994 (inception date) to February 28, 1994.
</TABLE>
See Notes to Financial Statements.
34
<PAGE> 136
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR............... $ 25.20 $20.38
-------- --------
Income from Investment Operations:
Net investment income.................................... 0.04 0.07
Net realized gains/(losses) on investment transactions... 3.47 5.35
-------- --------
Total income from investment operations.................... 3.51 5.42
-------- --------
Less: Dividends and Distributions:
Dividends to shareholders from net investment income..... (0.03) (0.07)
Distributions to shareholders from net realized gains on
investment transactions................................ (1.74) (0.53)
-------- --------
Total Dividends and Distributions.......................... (1.77) (0.60)
-------- --------
Net change in net asset value per share.................... 1.74 4.82
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD................... $ 26.94 $25.20
======== ========
Total return............................................... 14.10%++ 26.96%++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................... $ 3 $ 1
Ratio of expenses to average net assets.................. 1.73%+ 1.92%+
Ratio of net investment income to average net assets..... 0.17%+ 0.45%+
Ratio of expenses to average net assets*................. 1.81%+ 2.12%+
Ratio of net investment income to average net assets*.... 0.09%+ 0.25%+
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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.
+ Annualized.
++ Not annualized.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
</TABLE>
See Notes to Financial Statements.
35
<PAGE> 137
PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-------------------------- FOR THE PERIOD
JUNE 23, MARCH 1, --------------------------
1997 1997 DECEMBER 6, JANUARY 1,
THROUGH THROUGH YEAR ENDED 1993 1993
AUGUST 31, JUNE 22, ------------------------------------------ THROUGH THROUGH YEAR ENDED
1997 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, DECEMBER 5, DECEMBER 31,
(UNAUDITED) (UNAUDITED) 1997 1996 1995 1994 1993(a) 1992(a)
----------- ----------- ------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET
VALUE PER
SHARE,
BEGINNING
OF YEAR.... $ 24.02 $ 24.64 $21.09 $17.35 $17.75 $17.34 $ 15.65 $15.17
-------- -------- -------- -------- -------- -------- ------- ------
Income from
Investment
Operations:
Net
investment
income.... 0.04 4.01 0.31 0.31 0.28 0.05 0.29 0.30
Net
realized
and
unrealized
gains
(losses)
on
investment
transactions... 0.08 (0.57) 4.83 5.35 0.88 0.37 1.69 0.48
-------- -------- -------- -------- -------- -------- ------- ------
Total income
from
investment
operations... 0.12 3.44 5.14 5.66 1.16 0.42 1.98 0.78
-------- -------- -------- -------- -------- -------- ------- ------
Less
Dividends
and
Distributions:
Dividends
to
shareholders
from net
investment
income.... -- (4.06) (0.31) (0.31) (0.26) (0.01) (0.29) (0.30)
Distributions
to
shareholders
from net
realized
gains..... -- -- (1.28) (1.61) (1.30) -- -- --
-------- -------- -------- -------- -------- -------- ------- ------
Total
Dividends
and
Distributions.. -- (4.06) (1.59) (1.92) (1.56) (0.01) (0.29) (0.30)
-------- -------- -------- -------- -------- -------- ------- ------
Net change
in net
asset value
per
share...... 0.12 (0.62) 3.55 3.74 (0.40) 0.41 1.69 0.48
-------- -------- -------- -------- -------- -------- ------- ------
NET ASSET
VALUE PER
SHARE, END
OF
PERIOD..... $ 24.14 $ 24.02 $24.64 $21.09 $17.35 $17.75 $ 17.34 $15.65
======== ======== ======== ======== ======== ======== ======= ======
Total
Return..... 14.58%++ 11.64% 27.42% 33.37% 6.95% 2.42%+ 12.74%++ 5.16%
RATIO/SUPPLEMENTAL
DATA:
Net assets,
end of
period
(millions)... $ 319 $ 272 $ 274 $ 206 $ 151 $ 133 $ 123 $ 96
Ratio of
expenses
to average
net
assets.... 0.96%+ 0.89% 0.92% 0.95% 0.82% 0.95%+ 0.95%+ 0.95%
Ratio of
net
investment
income to
average
net
assets.... 0.87%+ 1.07% 1.37% 1.53% 1.64% 1.28%+ 1.91%+ 2.08%
Ratio of
expenses
to average
net
assets*... 1.20%+ 1.57% 1.55% 1.54% 1.62% 1.88%* 0.95%+ 0.95%
Ratio of
net
investment
income to
average
net
assets*... 0.63%+ 0.39% 0.74% 0.94% 0.84% 0.35%* 1.91%+ 2.08%
Portfolio
turnover
rate...... 35% N/A N/A N/A N/A N/A 4% 27%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(a) 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.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
36
<PAGE> 138
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD
AUGUST 31, ------------------------------------------ ENDED
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997(b) 1996 1995 1994(a)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR....... $ 9.54 $ 9.75 $ 9.44 $ 9.81 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income............................. 0.24 0.52 0.59 0.59 0.08
Net realized and unrealized gain (loss) on
investment transactions......................... 0.09 (0.15) 0.33 (0.37) (0.19)
-------- -------- -------- -------- --------
Total income (loss) from investment operations..... 0.33 0.37 0.92 0.22 (0.11)
-------- -------- -------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income.......................................... (0.24) (0.52) (0.59) (0.59) (0.08)
Dividends to shareholders from net realized gains
on investment transactions...................... (0.03) (0.06) (0.02) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions.................. (0.27) (0.58) (0.61) (0.59) (0.08)
-------- -------- -------- -------- --------
Net change in net asset value per share............ 0.06 (0.21) 0.31 (0.37) (0.19)
-------- -------- -------- -------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD........... $ 9.60 $ 9.54 $ 9.75 $ 9.44 $ 9.81
======== ======== ======== ======== ========
Total return (excludes sales charge)............... 3.52%++ 3.92% 10.45% 2.27% (1.10%)++
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)................. $ 35,306 $ 22,937 $ 13,179 $ 1,964 $ 356
Ratio of expenses to average net assets........... 0.83%+ 0.75% 0.27% 0.00% 0.00%+
Ratio of net investment income to average net
assets.......................................... 5.62%+ 5.45% 6.13% 6.43% 5.70%+
Ratio of expenses to average net assets*.......... 1.16%+ 2.26% 5.00% 17.95% 160.20%+
Ratio of net investment income (loss) to average
net assets*..................................... 5.29%+ 3.94% 1.40% (11.52%) (154.50%)+
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
+ Annualized.
++ Not Annualized.
(a) Period from January 13, 1994 (inception date) to February 28, 1994.
(b) As of July 22, 1996 the Fund designated the existing series of shares as "A"
shares.
See Notes to Financial Statements.
37
<PAGE> 139
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
AUGUST 31, ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997 (a)
-------------- ------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR........................... $ 9.54 $ 9.53
------ ------
Income from Investment Operations:
Net investment income................................................. 0.22 0.31
Net realized and unrealized gain on investments....................... 0.08 0.07
------ ------
Total income from investment operations............................... 0.30 0.38
------ ------
Less Dividends and Distributions:
Dividends to shareholders from net investment income.................. (0.22) (0.31)
Distributions to shareholders from net realized gains on
investments......................................................... (0.03) (0.06)
------ ------
Total Dividends and Distributions...................................... (0.25) (0.37)
------ ------
Net change in net asset value per share................................ 0.05 0.01
------ ------
NET ASSET VALUE PER SHARE, END OF PERIOD............................... $ 9.59 $ 9.54
====== ======
Total return........................................................... 3.16%(c) 3.73%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)..................................... $ 415 $ 332
Ratio of expenses to average net assets............................... 1.32%(b) 1.43%(b)
Ratio of net investment income to average net assets.................. 5.12%(b) 5.41%(b)
Ratio of expenses to average net assets*.............................. 1.66%(b) 2.71%(b)
Ratio of net investment income to average net assets*................. 4.78%(b) 4.13%(b)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Annualized.
(c) Non annualized.
See Notes to Financial Statements.
38
<PAGE> 140
THIS PAGE INTENTIONALLY LEFT BLANK
39
<PAGE> 141
PACIFIC HORIZON INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
--------------------------
JUNE 23, MARCH 1,
1997 THROUGH 1997 THROUGH YEAR ENDED
AUGUST 31, JUNE 22, ----------------------------------------
1997 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SRF SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF YEAR............... $10.73 $10.70 $10.87 $10.48 $11.00
------- ------ ------ ------ ------
Income from Investment
Operations:
Net investment income........... 0.12 0.15 0.57 0.64 0.61
Net realized and unrealized
gain(loss) on investment
transactions.................. -- 0.08 (0.18) 0.39 (0.46)
------- ------ ------ ------ ------
Total income (loss) from
investment operations........... 0.12 0.23 0.39 1.03 0.15
Less Dividends and Distributions:
Dividends to shareholders from
net investment income......... (0.11) (0.16) (0.56) (0.64) (0.61)
Distributions to shareholders
from net realized gains....... -- (0.04) -- -- (0.06)
------- ------ ------ ------ ------
Total Dividends and
Distributions................... (0.11) (0.20) (0.56) (0.64) (0.67)
------- ------ ------ ------ ------
Net change in net asset value per
share........................... 0.01 0.03 (0.17) 0.39 (0.52)
------- ------ ------ ------ ------
NET ASSET VALUE PER SHARE, END OF
PERIOD.......................... $10.74 $10.73 $10.70 $10.87 $10.48
======= ====== ====== ====== ======
Total Return..................... 3.31%++ 2.04%++ 3.74% 9.90% 1.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(millions).................... $ 36 $ 37 $ 39 $ 47 $ 56
Ratio of expenses to average net
assets........................ 0.95%+ 0.94% 0.95% 0.95% 0.83%
Ratio of net investment income
(loss) to average net
assets........................ 5.62%+ 5.41% 5.21% 5.74% 5.64%
Ratio of expenses to average net
assets*....................... 1.20%+ 1.55% 1.45% 1.56% 1.41%
Ratio of net investment income
to average net assets*........ 5.37%+ 4.80% 4.71% 5.13% 5.06%
Portfolio turnover rate......... 59% N/A N/A N/A N/A
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
++ Not Annualized.
+ Annualized.
(a) Represents activity of the Fund prior to its reorganization from the
Intermediate Bond Fund of Collective Investment Trust for Severest
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.
See Notes to Financial Statements.
40
<PAGE> 142
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-----------------------------
DECEMBER 6, JANUARY 1,
1993 THROUGH 1993 THROUGH YEAR ENDED
FEBRUARY 28, DECEMBER 5, DECEMBER 31,
1994 1993(a) 1992(a)
------------ ------------ ------------
<S> <C> <C>
$11.14 $10.99 $11.01
------ ------ ------
0.12 0.58 0.67
(0.14) 0.15 (0.02)
------ ------ ------
(0.02) 0.73 0.65
(0.12) (0.58) (0.67)
-- -- --
------ ------ ------
(0.12) (0.58) (0.67)
------ ------ ------
(0.14) 0.15 (0.02)
------ ------ ------
$11.00 $11.14 $10.99
====== ====== ======
(0.23)%++ 6.80%++ 6.04%
$ 77 $ 83 $ 74
0.95%+ 0.95%+ 0.95%
4.38%+ 5.60%+ 6.15%
1.79%+ 0.95%+ 0.95%
3.54%+ 5.60%+ 6.15%
N/A 95% 154%
</TABLE>
41
<PAGE> 143
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COMMON STOCK -- 96.7%
AEROSPACE/DEFENSE -- 2.7%
General Dynamics Corp. ............................................. 28,900 $ 2,301,163
Lockheed Martin Corp. .............................................. 52,700 5,464,331
United Technologies Corp. .......................................... 106,900 8,344,881
------------
16,110,375
------------
AIRLINES -- 0.3%
U.S. Air Group, Inc.** ............................................. 45,800 1,562,925
------------
AUTOMOBILE MANUFACTURERS -- 1.8%
Ford Motor Co. ..................................................... 144,300 6,204,900
General Motors Corp. ............................................... 72,700 4,561,925
------------
10,766,825
------------
AUTOMOBILE PARTS -- 0.6%
Dana Corp. ......................................................... 76,100 3,505,356
------------
BEVERAGES -- 2.9%
Coca-Cola Co. ...................................................... 204,400 11,714,675
PepsiCo, Inc. ...................................................... 166,100 5,979,600
------------
17,694,275
------------
BUILDING RELATED -- 0.4%
Centex Corp. ....................................................... 47,600 2,588,250
------------
CHEMICALS -- 3.0%
Air Products & Chemicals, Inc. ..................................... 61,600 5,024,250
DuPont, (E.I.) de Nemours & Co. .................................... 202,600 12,624,512
------------
17,648,762
------------
CLOTHING & APPAREL -- 0.5%
VF Corp. ........................................................... 34,100 3,013,587
------------
COMPUTER HARDWARE -- 5.3%
Compaq Computer Corp.** ............................................ 169,750 11,118,625
Dell Computer Corp.** .............................................. 110,400 9,059,700
International Business Machines Corp. .............................. 64,000 6,456,000
Sun Microsystems, Inc.** ........................................... 105,200 5,049,600
------------
31,683,925
------------
COMPUTER SERVICES & SOFTWARE -- 3.8%
Microsoft Corp.** .................................................. 136,600 18,056,813
Oracle Corp.** ..................................................... 121,650 4,637,906
------------
22,694,719
------------
CONSUMER PRODUCTS & SERVICES -- 3.7%
Avon Products, Inc. ................................................ 92,000 5,893,750
Philip Morris Cos., Inc. ........................................... 241,800 10,548,525
Texas Instruments, Inc. ............................................ 51,200 5,817,600
------------
22,259,875
------------
ELECTRONIC COMPONENTS & EQUIPMENT -- 2.7%
General Electric Co. ............................................... 260,200 16,262,500
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 144
<TABLE>
<S> <C> <C>
ENTERTAINMENT & LEISURE -- 1.9%
Hasbro, Inc. ....................................................... 103,450 $ 2,780,219
King World Productions, Inc. ....................................... 55,600 2,210,100
Walt Disney Co. .................................................... 81,478 6,258,529
------------
11,248,848
------------
FINANCIAL -- BANK & TRUST -- 9.3%
Barnett Banks, Inc. ................................................ 113,100 7,704,937
Bankers Trust New York Corp. ....................................... 49,300 5,114,875
Chase Manhattan Corp. .............................................. 36,000 4,002,750
Citicorp ........................................................... 38,200 4,875,275
Comerica, Inc. ..................................................... 51,500 3,646,844
First Union Corp. .................................................. 178,600 8,583,962
Fleet Financial Group, Inc. ........................................ 98,900 6,372,869
Mellon Bank Corp. .................................................. 141,200 6,795,250
NationsBank Corp. .................................................. 64,900 3,853,437
State Street Corp. ................................................. 88,600 4,418,925
------------
55,369,124
------------
FINANCIAL SERVICES -- 1.4%
Morgan Stanley Dean Witter Discover & Co. .......................... 173,200 8,335,250
------------
FOOD -- 3.4%
American Stores Co. ................................................ 219,300 5,194,669
Conagra, Inc. ...................................................... 85,600 5,505,150
Hershey Foods Corp. ................................................ 62,300 3,325,262
Kellogg Co. ........................................................ 37,200 1,664,700
Sara Lee Corp. ..................................................... 112,400 4,524,100
------------
20,213,881
------------
HEALTHCARE SERVICES -- 1.0%
Tenet Healthcare Corp.** ........................................... 218,200 5,945,950
------------
HOUSEHOLD PRODUCTS -- 2.6%
Clorox Co. ......................................................... 37,000 4,856,250
Procter & Gamble Co. ............................................... 80,700 10,738,144
------------
15,594,394
------------
HOTELS & MOTELS -- 0.6%
Marriott Corp.** ................................................... 54,700 3,640,969
------------
INSURANCE -- 4.8%
Allstate Corp. ..................................................... 70,197 5,128,768
CIGNA Corp. ........................................................ 38,600 7,078,275
Conseco, Inc. ...................................................... 138,900 5,972,700
General Re Corp. ................................................... 19,200 3,722,400
Travelers Group, Inc. .............................................. 104,100 6,610,350
------------
28,512,493
------------
MACHINERY & EQUIPMENT -- 1.7%
Caterpillar, Inc. .................................................. 67,000 3,890,188
Ingersoll Rand Co. ................................................. 48,200 2,898,025
Parker Hannifin Corp. .............................................. 48,200 3,099,863
------------
9,888,076
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.7%
Abbot Laboratories ................................................. 66,800 4,003,825
Johnson & Johnson Co. .............................................. 165,800 9,398,787
U.S. Surgical Corp. ................................................ 77,800 2,562,538
------------
15,965,150
------------
METALS & MINING -- 1.3%
Phelps Dodge Corp. ................................................. 54,800 4,407,975
USX -- U.S. Steel Group, Inc. ...................................... 93,800 3,294,725
------------
7,702,700
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 145
<TABLE>
<S> <C> <C>
MULTI-INDUSTRY -- 2.3%
Dover Corp. ........................................................ 59,600 $ 4,116,125
Tyco International Ltd. ............................................ 117,500 9,216,406
------------
13,332,531
------------
OIL (DOMESTIC) -- 1.8%
Phillips Petroleum Co. ............................................. 110,600 5,260,413
USX -- Marathon Group .............................................. 170,400 5,548,650
------------
10,809,063
------------
OIL (INTERNATIONAL) -- 5.8%
Chevron Corp. ...................................................... 109,100 8,448,431
Exxon Corp. ........................................................ 201,100 12,304,806
Mobil Corp. ........................................................ 102,900 7,485,975
Royal Dutch Petroleum Co. .......................................... 116,400 5,907,300
------------
34,146,512
------------
OIL & GAS -- 1.2%
Schlumberger, Ltd. ................................................. 96,000 7,314,000
------------
PAPER & FOREST PRODUCTS -- 1.1%
James River Corp. of Virginia** .................................... 110,500 4,641,000
Weyerhaeuser Co. ................................................... 36,400 2,102,100
------------
6,743,100
------------
PHARMACEUTICALS -- 6.6%
Bristol-Meyers ..................................................... 113,800 8,648,800
Lilly, (Eli) & Co. ................................................. 57,100 5,974,088
Merck & Co., Inc. .................................................. 142,400 13,074,100
Schering-Plough Corp. .............................................. 161,700 7,761,600
Warner-Lambert Co. ................................................. 31,300 3,977,056
------------
39,435,644
------------
PRINTING & PUBLISHING -- 0.9%
McGraw-Hill Cos., Inc. ............................................. 43,400 2,660,963
New York Times Co. ................................................. 52,700 2,490,075
------------
5,151,038
------------
SEMI-CONDUCTORS -- 2.6%
Applied Materials, Inc.** .......................................... 43,600 4,114,750
Motorola, Inc. ..................................................... 150,300 11,028,262
------------
15,143,012
------------
RAILROADS -- 1.0%
Burlington Northern Santa Fe ....................................... 61,700 5,657,119
------------
RETAIL & MERCHANDISING -- 4.0%
CUC International, Inc. ............................................ 194,100 4,561,350
Dayton Hudson Corp. ................................................ 47,400 2,701,800
Home Depot, Inc. ................................................... 208,900 9,857,469
TJX Companies, Inc. ................................................ 233,000 6,407,500
------------
23,528,119
------------
TELECOMMUNICATIONS -- 2.5%
3Com Corp.** ....................................................... 91,400 4,564,288
Lucent Technologies, Inc. .......................................... 66,000 5,139,750
Tellabs, Inc.** .................................................... 86,000 5,133,125
------------
14,837,163
------------
UTILITIES -- GAS -- 0.7%
Pacific Enterprises ................................................ 116,900 3,850,394
------------
UTILITIES -- ELECTRIC -- 2.3%
FPL Group, Inc. .................................................... 147,300 6,849,450
GPU, Inc. .......................................................... 200,300 6,735,087
------------
13,584,537
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 146
<TABLE>
<S> <C> <C>
UTILITIES -- TELEPHONE -- 5.5%
Ameritech Corp. .................................................... 110,400 $ 6,920,700
Bell Atlanta Corp. ................................................. 105,522 7,637,126
BellSouth Corp. .................................................... 176,300 7,757,200
U.S. WEST Communications Group ..................................... 106,000 3,796,125
WorldCom, Inc.** ................................................... 210,300 6,295,856
------------
32,407,007
------------
TOTAL COMMON STOCK (COST $465,960,052) .............................. 574,147,448
------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
---- -------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
U.S. Treasury Bill (Cost $995,248)............. 5.31% 10/02/97 $1,000,000 995,248
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 3.0%
Temporary Investment Fund (Cost $17,766,052) ........................ 17,766,052 17,766,052
------------
TOTAL INVESTMENTS -- 99.8% (COST $484,721,532)(A)................................. 592,908,748
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%..................................... 920,282
------------
NET ASSETS -- 100.0%.............................................................. $593,829,030
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $593,829,030.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................ $111,454,572
Unrealized depreciation................................ (3,267,356)
------------
Net unrealized appreciation............................ $108,187,216
============
</TABLE>
* Effective Yield.
** Non-income producing security.
Schedule of Open Financial Futures Contracts Purchased
<TABLE>
<CAPTION>
NET UNREALIZED
EXPIRATION NUMBER OF CONTRACT APPRECIATION
DATE CONTRACTS CONTRACTS VALUE OF CONTRACTS
- ---------- --------- ------------------------ ----------- --------------
<S> <C> <C> <C> <C>
9/19/97 30 S&P 500 -- September 1997 $13,546,500 $ 49,500
========
</TABLE>
See Notes to Financial Statements.
45
<PAGE> 147
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
S&P/MOODY'S MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ------------- ----- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- 12.8%
AESOP Funding II Series 1997-I, Class
A1................................... Aaa/AAA 6.22% 10/20/01 $2,000,000 $ 1,997,813
Citibank Credit Card Master Trust I
(ZCB)................................ Aaa/AAA 0.00% 08/15/06 2,000,000 1,247,730
Contimortgage Home Equity Loan........ AAA/Aaa 6.60% 10/15/11 2,000,000 1,984,562
Contimortgage Home Equity Loan Trust
1997-3 A5............................ AAA/Aaa 7.01% 08/15/13 2,000,000 2,015,625
Standard Credit Card Master Trust
Series 1995-3, Class A............... AAA/Aaa 7.85% 02/07/02 2,500,000 2.590,613
The Money Store Home Equity Trust
Series 1996-B........................ AAA/Aaa 7.38% 05/15/17 1,000,000 1,019,222
The Money Store, Series 1997-B A5..... AAA/Aaa 6.83% 07/15/21 2,500,000 2,507,055
World Omni Automobile Lease
Securitization Trust, Series 1997-A,
Class A4............................. AAA/Aaa 6.90% 06/25/03 2,250,000 2,280,803
-----------
TOTAL ASSET BACKED SECURITIES (COST $15,684,499) 15,643,623
-----------
CORPORATE BONDS -- 28.2%
Aetna Services Inc.................... A2/A 6.76% 08/15/01 5,500,000 5,534,375
Bear Steams Co........................ A2/A 6.50% 07/05/00 2,000,000 2,002,500
Finova Capital Corp................... Baa 1/A- 6.63% 09/15/01 3,500,000 3,482,500
Ford Motor Credit Co.................. A1/A+ 5.75% 01/25/01 2,000,000 1,955,000
General Motors Acceptance Corp........ A3/A- 7.13% 05/01/01 3,950,000 4,014,187
General Motors Acceptance Corp........ A3/A- 6.88% 07/15/01 2,000,000 2,017,500
Hartford Life, Inc.................... A2/A 6.90% 06/15/04 3,000,000 3,003,750
International Lease Finance Corp...... A1/A+ 6.88% 05/01/01 4,000,000 4,040,000
Merrill Lynch & Co., Inc.............. Aa3/AA- 6.00% 01/15/01 2,000,000 1,970,000
Morgan Stanley Debentures............. A1/A+ 9.38% 06/15/01 4,165,000 4,550,263
Waste Management Inc.................. A3/A- 6.63% 07/15/02 2,000,000 1,990,000
-----------
TOTAL CORPORATE BONDS (COST $34,296,226) 34,560,075
-----------
MEDIUM TERM NOTES -- 19.5%
Associates Corp. of North America
Underwritten Senior Notes............ Aa3/AA- 6.75% 07/15/01 4,100,000 4,125,625
Fuji Bank............................. A3/NR 7.30% 03/29/49 3,000,000 3,018,217
Ikon Capital Inc...................... A3/A- 6.73% 06/15/01 2,500,000 2,503,125
McDonnel Douglas Financial Corp....... A2/AA 6.83% 05/21/01 4,000,000 4,035,000
NationsBank Corp...................... A1/A+ 6.09% 12/14/01 5,000,000 4,887,500
Paine Webber Group, Series C.......... Baa1/BBB+ 7.31% 08/09/00 3,000,000 3,048,750
Sears Roebuck Acceptance Corp......... A2/A- 7.00% 06/15/07 2,200,000 2,202,750
-----------
TOTAL MEDIUM TERM NOTES (COST $23,734,148) 23,820,967
-----------
</TABLE>
See Notes to Financial Statements.
46
<PAGE> 148
<TABLE>
<CAPTION>
MATUITY PRINCIPAL VALUE
DESCRIPTION RATE DATE AMOUNT (NOTE 2)
- -------------------------------------- ----- --------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 4.7%
Federal Home Loan Mortgage Corp. Pool
#160034.............................. 8.50% 12/01/07 $ 56,471 $ 59,418
Federal Home Loan Mortgage Corp. Pool
#284343.............................. 8.00% 12/01/16 7,863 8,141
Federal Home Loan Mortgage Corp. Pool
#297505.............................. 8.00% 06/01/17 17,628 18,349
Federal Home Loan Mortgage Corp. Pool
#549837.............................. 8.00% 07/01/10 173,389 180,433
Federal Home Loan Mortgage Corp.
Series #1501 Class G................. 6.40% 05/15/18 2,300,000 2,288,621
Federal National Mortgage Association
Pool #131579......................... 6.50% 07/01/04 114,533 110,489
Federal National Mortgage Association
Pool #286087......................... 9.00% 06/01/24 675,990 697,748
Fncx ppl #303528...................... 6.00% 06/01/01 1,963,425 1,921,089
Government National Mortgage
Association Pool #136688............. 10.00% 09/15/15 25,611 28,432
Government National Mortgage
Association Pool #166744............. 10.00% 07/15/16 258,911 285,207
Government National Association Pool
#209480.............................. 10.00% 07/15/17 78,783 86,785
Government National Mortgage
Association Pool #227082............. 10.00% 08/15/17 111,361 122,671
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.......................... 5,807,383
-----------
U.S. TREASURY OBLIGATIONS -- 32.5%
U.S. Treasury Notes................... 7.75% 01/31/00 18,500,000 19,195,043
U.S. Treasury Notes................... 5.63% 02/28/01 2,700,000 2,656,044
U.S. Treasury Notes................... 5.88% 06/30/00 10,000,000 9,948,999
U.S. Treasury Notes................... 7.00% 07/15/06 7,705,453 7,947,062
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$38,022,147)......................... 39,747,148
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
----------
<S> <C> <C>
TEMPORARY INVESTMENTS -- 2.4%
Temporary Investment Cash Fund........ $1,458,382 $ 1,458,382
Temporary Investment Fund............. 1,466,382 1,466,382
-----------
TOTAL TEMPORARY INVESTMENTS (COST $2,924,766) 2,924,764
-----------
TOTAL INVESTMENTS -- 100.1% (COST $121,839,254)(a) 122,504,493
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1)% (166,158)
-----------
NET ASSETS -- 100.0%.................. $122,338,335
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $122,338,335.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................................... $ 843,444
Unrealized depreciation...................................................... (178,205)
----------
Net unrealized depreciation.................................................. $ 665,239
===========
</TABLE>
(ZCB) Zero Coupon Bond
See Notes to Financial Statements.
47
<PAGE> 149
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $484,721,532).............. $592,908,748
Dividend Receivable................................................. 1,014,093
Interest Receivable................................................. 72,165
Contribution receivable............................................. 1,439,225
Variation margin receivable on futures contract..................... 49,500
Deferred organization costs......................................... 17,313
Prepaid expenses.................................................... 48,594
------------
Total Assets.......................................................... 595,549,638
------------
LIABILITIES
Withdrawal payable.................................................. 1,142,882
Advisory fees payable............................................... 256,754
Administration fees payable......................................... 25,676
Audit fees payable.................................................. 26,732
Fund accounting fees and expense payable............................ 46,817
Custodian fees payable.............................................. 3,795
Legal fees payable.................................................. 15,914
Other accrued expenses.............................................. 202,038
------------
Total Liabilities..................................................... 1,720,608
------------
NET ASSETS............................................................ $593,829,030
============
</TABLE>
- ---------------
See Notes to Financial Statements.
48
<PAGE> 150
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $121,839,254)............. $122,504,493
Receivable for securities sold...................................... 2,672,703
Contribution receivable............................................. 297,651
Interest receivable................................................. 1,428,852
Deferred organization costs......................................... 17,243
Prepaid expenses.................................................... 12,014
------------
Total Assets.......................................................... 126,932,956
------------
LIABILITIES:
Withdrawal payable.................................................. 385,769
Payable for securities purchased.................................... 4,122,829
Advisory fees payable............................................... 15,191
Audit fees payable.................................................. 30,315
Fund accounting fees payable........................................ 10,020
Legal fees payable.................................................. 5,989
Administration fees payable......................................... 2,270
Other accrued expenses.............................................. 22,238
------------
Total Liabilities..................................................... 4,594,621
------------
NET ASSETS............................................................ $122,338,335
============
</TABLE>
- ---------------
See Notes to Financial Statements.
49
<PAGE> 151
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income...................................................... $ 4,613,845
Interest income...................................................... 429,249
-----------
Total income....................................................... 5,043,094
-----------
EXPENSES
Advisory fees........................................................ 1,754,959
Administration fees.................................................. 136,084
Fund accounting fees and expenses.................................... 140,530
Audit fees........................................................... 12,735
Custodian fees and expenses.......................................... 35,526
Legal fees........................................................... 22,373
Trustees' fees....................................................... 12,703
Amortization of organization costs................................... 6,992
Other expenses....................................................... 8,063
-----------
Total Expenses..................................................... 2,129,965
Less: Fee waivers and expense reimbursements......................... (279,642)
-----------
Total Net Expenses................................................... 1,850,323
-----------
Net Investment Income.................................................. 3,192,771
-----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions........................ 34,879,065
Net change in unrealized appreciation on investments and futures..... 35,352,626
-----------
Net realized/unrealized gains on investments and futures............... 70,231,691
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $73,424,462
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
50
<PAGE> 152
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest Income........................................................ $4,552,804
----------
EXPENSES:
Advisory fees.......................................................... 279,369
Administration fees.................................................... 35,656
Fund accounting fees and expenses...................................... 54,032
Amortization of organization costs..................................... 6,992
Audit fees............................................................. 16,650
Legal fees............................................................. 6,655
Directors fees......................................................... 3,566
Other operating expenses............................................... 10,017
----------
Total Expenses................................................... 412,937
Less: Fee waivers and reimbursements..................................... (156,639)
----------
Total Net Expenses....................................................... 256,298
----------
NET INVESTMENT INCOME.................................................... 4,296,506
----------
REALIZED/UNREALIZED (LOSSES) ON INVESTMENTS FROM MASTER INVESTMENT TRUST,
SERIES I -- INVESTMENT GRADE BOND PORTFOLIO:
Net realized losses on investment transactions......................... (405,757)
Net change in unrealized depreciation on investments................... 1,294,579
----------
Net realized / unrealized losses on investments........................ 888,822
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................... $5,185,328
==========
</TABLE>
- ---------------
See Notes to Financial Statements.
51
<PAGE> 153
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Operations:
Net investment income.................................. $ 3,192,771 $ 5,845,867
Net realized gains on investment transactions.......... 34,879,065 62,491,398
Net change in unrealized appreciation on investments... 35,352,626 26,358,970
------------ ------------
Change in net assets resulting from operations......... 73,424,462 94,696,235
------------ ------------
Trust Share Transactions:
Contributions.......................................... 100,389,612 176,422,520
Withdrawals............................................ (56,551,614) (70,074,459)
------------ ------------
Change in net assets from trust share transactions....... 43,837,998 106,348,061
------------ ------------
Change in net assets..................................... 117,262,460 201,044,296
NET ASSETS
Beginning of Period.................................... 476,566,570 275,522,274
------------ ------------
End of Period.......................................... $593,829,030 $476,566,570
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
52
<PAGE> 154
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
---------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income............................. $ 4,296,506 $ 5,575,868
Net realized gain (loss) on investment
transactions.................................... (405,757) (535,492)
Net change in unrealized depreciation on
investments..................................... 1,294,579 (681,210)
------------ ------------
Change in net assets resulting from operations.... 5,185,328 4,359,166
------------ ------------
TRUST SHARE TRANSACTIONS:
Contributions..................................... 27,755,852 94,643,822
Withdrawals....................................... (49,759,764) (26,135,644)
------------ ------------
Change in net assets resulting from trust share
transactions...................................... (22,003,912) 68,508,178
------------ ------------
Change in net assets................................ (16,818,584) 72,867,344
NET ASSETS
Beginning of Period............................... 139,156,919 66,289,575
------------ ------------
End of Period..................................... $122,338,335 $ 139,156,919
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
53
<PAGE> 155
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
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 August 31, 1997, the Trust
consisted of two portfolios; the Blue Chip Portfolio (the "Blue Chip Portfolio")
and Investment Grade Bond Portfolio (the "Bond Portfolio") (collectively the
"Portfolios").
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 term
bonds, including corporate and Government fixed income obligations and mortgage
backed securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, served as the Portfolio's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly owned subsidiary,
BISYS Fund Services, Limited Partnership served as the Portfolios'
administrator. Effective September 15, 1997, PFPC Inc., wholly owned subsidiary
of PNC Bank Corp., serves as administrator for the Trust.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the 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 in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
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 securities exchange on which such securities
are primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. 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 securi-
54
<PAGE> 156
ties 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.
FUTURES:
A futures contract is an agreement to purchase or sell a specified quantity
of an underlying instrument at a specified future date or to make or receive a
cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Upon entering into such a contract the Portfolio is required to pledge
to the broker an amount of cash and/or securities equal to the minimum "initial
margin" requirements of the exchange. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time when it was closed. The Portfolio invests
in futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest rates. The
use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets, and the possible inability of counterparties to meet the terms of
their contracts. The summary of open financial futures contracts at August 31,
1997 is included in the Blue Chip Portfolio's Schedule of Investments which is
included elsewhere in this report.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recorded on the ex-dividend date. Realized gains and
losses on securities transactions are determined on the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
FEDERAL INCOME TAXES:
The Portfolios will be treated as a partnership 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 require-
55
<PAGE> 157
ments of the Internal Revenue Code applicable to regulated investment companies.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolios have an Investment Advisory Agreement with Bank of America
and had an Administration Agreement with BISYS.
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 Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, which is accrued daily and
payable monthly, at an annual rate of 0.75% from March 1, 1997 through June 22,
1997, and 0.50% from June 23, 1997 through August 31, 1997 of the average daily
net assets of the Portfolios. For the six months ended August 31, 1997, Bank of
America waived $262,519, and $140,896 in fees as Adviser of the Blue Chip
Portfolio and Bond Portfolio.
As Administrator, BISYS assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, BISYS was
entitled to a fee which was accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the six months ended
August 31, 1997, BISYS waived $17,123 and $15,473 in fees as Administrator of
the Blue Chip Portfolio and Bond Portfolio.
For services provided to the portfolios constituting the Trust, each Trustee
receives an annual fee of $3,000 and a meeting fee of $500.
For the six months ended August 31, 1997, the Blue Chip Portfolio and Bond
Portfolio incurred legal expenses of $22,373 and $6,655, which were earned by a
law firm, a partner of which serves as Secretary of the Trust.
Certain officers of the Trust are affiliated with BISYS. Such persons are
not paid directly by the Trust for serving in these capacities.
NOTE 4 -- SECURITIES TRANSACTIONS
During the six months ended August 31, 1997, each Portfolio purchased and
sold portfolio securities, excluding short-term securities, in the following
amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
========= =========
<S> <C> <C>
Blue Chip Portfolio
Common Stocks $230,612,694 $181,509,424
Bond Portfolio
U.S. Government $ 48,542,025 $ 14,952,580
Other 30,379,434 80,454,007
------------ ------------
Total $ 78,921,459 $ 95,406,587
============ ============
</TABLE>
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Investment Grade Bond Portfolio had the following concentrations by
industry sector at August 31, 1997 (as a percentage of total investments):
<TABLE>
<S> <C>
Asset-Backed Securities............... 12.8
Corporate Bonds....................... 28.2
Medium Term Notes..................... 19.5
Temporary Investments................. 2.4
U.S. Government Agency Obligations.... 4.7
U.S. Treasury Notes................... 32.4
-----
100.0%
======
</TABLE>
56
<PAGE> 158
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, ------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994*
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net
assets............................... 0.75%** 0.62% 0.31% 0.17% 0.27%**
Ratio of net investment income to
average net assets................... 1.30%** 1.62% 2.16% 2.30% 1.97%**
Ratio of expenses to average net
assets(a)............................ 0.87%** 0.90% 0.90% 0.97% 1.07%**
Ratio of net investment income to
average net assets(a)................ 1.19%** 1.34% 1.57% 1.50% 1.17%**
Portfolio Turnover.................... 35% 91% 108% 44% 86%
Average Commission rate paid(b)....... $0.0506 $ 0.0530 -- -- --
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(b) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged.
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.
** Annualized.
57
<PAGE> 159
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX YEAR ENDED
MONTHS ENDED ------------------------------------------------------------
AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994*
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets... 0.36%** 0.35% 0.18% 0.25% 0.41%**
Ratio of net
investment income to
average net assets... 6.03%** 5.86% 6.47% 6.22% 4.93%**
Ratio of expenses to
average net
assets(a)............ 0.58%** 0.65% 0.68% 0.75% 0.91%**
Ratio of net
investment income to
average net
assets(a)............ 5.81%** 5.56% 5.97% 5.72% 4.43%**
Portfolio Turnover.... 59% 83% 172% 240% 32%
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
* For the period December 6, 1993 (commencement of operations) through February
28, 1994.
** Annualized.
58
<PAGE> 160
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 3.8%
DOMESTIC -- 3.2%
American Express Centurion Bank
Monthly Variable Rate (final
maturity 1/9/98)*.............. A1/P1 5.61% 09/09/97 $ 25,000,000 $ 24,999,318
American Express Centurion Bank
Monthly Variable Rate (final
maturity 4/15/98)*............. A1/P1 5.62% 09/15/97 50,000,000 50,000,000
American Express Centurion Bank
Monthly Variable Rate (final
maturity 6/26/98)*............. A1/P1 5.60% 09/26/97 25,000,000 25,000,000
Bank of New York................. A1/P1 6.10% 05/22/98 25,000,000 24,981,100
Huntington National Bank......... A1/P1 5.94% 08/31/98 50,000,000 49,971,415
PNC Bank, N.A., Monthly Variable
Rate (final maturity
10/01/97)*..................... A1/P1 5.52% 09/02/97 25,000,000 24,998,382
PNC Bank, N.A., Monthly Variable
Rate (final maturity
11/25/97)*..................... A1/P1 5.52% 09/25/97 50,000,000 49,963,450
--------------
TOTAL DOMESTIC BANK NOTES......... 249,913,665
--------------
FOREIGN -- 0.6%
Abbey National Treasury Services,
PLC............................ A1/P1 6.00% 06/17/98 50,000,000 49,997,726
--------------
TOTAL BANK NOTES (AMORTIZED COST
$299,911,391).................... 299,911,391
--------------
CERTIFICATE OF DEPOSIT -- 18.9%
DOMESTIC -- 5.0%
Bankers Trust Company, Daily
Variable Rate (final maturity
07/21/98)*..................... A1/P1 5.65% 09/02/97 25,000,000 24,989,321
Bankers Trust Company, Daily
Variable Rate (final maturity
9/30/97)*...................... A1/P1 5.62% 09/02/97 50,000,000 49,997,695
Bankers Trust Company, Weekly
Variable Rate (final maturity
10/16/97)*..................... A1/P1 5.50% 09/03/97 25,000,000 24,997,139
Bankers Trust Company, Weekly
Variable Rate (final maturity
12/10/97)*..................... A1/P1 5.56% 09/03/97 25,000,000 24,996,575
Bankers Trust Company, Weekly
Variable Rate (final maturity
07/07/98)*..................... A1/P1 5.66% 09/03/97 50,000,000 49,971,403
Crestar Bank..................... A1/P1 5.49% 09/19/97 25,000,000 25,000,000
Crestar Bank..................... A1/P1 5.63% 11/20/97 50,000,000 50,001,644
Crestar Bank..................... A1/P1 5.80% 04/08/98 50,000,000 50,000,000
Crestar Bank..................... A1/P1 5.86% 07/20/98 50,000,000 49,991,561
Morgan Guaranty Trust Company.... A1/P1 5.80% 07/28/98 25,000,000 24,991,346
Morgan Guaranty Trust Company.... A1/P1 5.87% 08/06/98 25,000,000 24,993,337
--------------
TOTAL DOMESTIC.................... 399,930,021
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
59
<PAGE> 161
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
EURO -- 0.9%
Sumitomo Bank, Ltd., London...... A1/P1 5.76% 10/15/97 $ 50,000,000 $ 50,000,602
Sumitomo Bank, Ltd., London...... A1/P1 5.77% 10/17/97 25,000,000 25,000,315
--------------
TOTAL EURO........................ 75,000,917
--------------
YANKEE -- 13.0%
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.85% 01/07/98 25,000,000 24,996,564
Bank of Tokyo Mitsubishi, New
York........................... A1/P1 5.88% 01/13/98 25,000,000 24,998,244
Banque National de Paris,
Chicago........................ A1/P1 5.97% 07/01/98 25,000,000 24,984,140
Banque National de Paris,
Chicago........................ A1/P1 5.89% 07/21/98 25,000,000 24,993,240
Banque National de Paris,
Chicago........................ A1/P1 5.80% 07/31/98 25,000,000 24,989,085
Banque National de Paris, New
York........................... A1/P1 5.75% 02/26/98 25,000,000 24,994,054
BHF Bank of Aktiengesellschaft,
New York, Monthly Variable Rate
(final maturity 8/13/98)*...... A1/P1 5.56% 09/15/97 50,000,000 49,981,553
Canadian Imperial Bank of
Commerce, New York............. A1/P1 5.87% 08/11/98 25,000,000 24,980,849
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.83% 09/02/97 25,000,000 25,000,007
Dai-Ichi Kangyo Bank, Ltd., New
York........................... A1/P1 5.94% 12/16/97 55,500,000 55,511,349
Industrial Bank of Japan, New
York........................... A1/P1 5.94% 12/04/97 50,000,000 50,001,267
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/10/97 50,000,000 50,001,356
Industrial Bank of Japan, New
York........................... A1/P1 5.80% 12/11/97 50,000,000 50,001,369
Istituto Bancario San Paolo Di
Torino, New York............... A1/P1 5.87% 07/20/98 50,000,000 49,987,345
Landesbank Hessen-Thuringen
Girozentrale, New York......... A1/P1 5.94% 06/19/98 25,000,000 24,988,570
National Australia Bank, New
York........................... A1/P1 5.80% 10/03/97 25,000,000 24,999,843
National Bank of Canada, New
York........................... A1/P1 6.15% 05/15/98 44,000,000 43,984,023
National Bank of Canada, New
York........................... A1/P1 6.14% 06/05/98 25,000,000 24,996,188
Royal Bank of Canada, New York... A1/P1 5.58% 12/11/97 25,000,000 24,991,983
Royal Bank of Canada, New York... A1/P1 5.65% 03/03/98 80,000,000 79,942,894
Societe Generale Bank, New York.. A1/P1 5.77% 01/09/98 25,000,000 24,996,590
Societe Generale Bank, New York.. A1/P1 5.59% 11/14/97 30,000,000 30,001,283
Societe Generale Bank, New York.. A1/P1 5.73% 10/15/97 15,000,000 15,002,168
Societe Generale Bank, New York.. A1/P1 5.77% 01/07/98 25,000,000 24,997,481
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 1/15/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,994,305
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 6/16/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,988,571
Societe Generale Bank, New York,
Daily Variable Rate (final
maturity 8/25/98)*............. A1/P1 5.73% 09/02/97 25,000,000 24,985,793
</TABLE>
- ---------------
See Notes to Financial Statements.
60
<PAGE> 162
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
YANKEE -- (CONTINUED)
Societe Generale Bank, New York,
Quarterly Variable Rate (final
maturity 12/24/97)*............ A1/P1 5.68% 09/24/97 $ 25,000,000 $ 24,994,534
Sumitomo Bank Ltd., New York..... A1/P1 5.60% 09/08/97 25,000,000 24,999,846
Westdeutsche Landes Bank Girozen
Trole, New York................ A1/P1 5.78% 07/31/98 35,000,000 34,992,741
Westpac Banking Corp., New
York........................... A1/P1 5.83% 01/22/98 25,000,000 24,998,125
Westpac Banking Corp., New
York........................... A1/P1 5.93% 08/12/98 25,000,000 24,990,964
--------------
TOTAL YANKEE...................... 1,034,266,324
--------------
TOTAL CERTIFICATE OF DEPOSIT
(AMORTIZED COST
$1,509,197,262).................. 1,509,197,262
--------------
COMMERCIAL PAPER -- 31.5%
DOMESTIC -- 26.9%
ASSET BACKED SECURITIES -- 9.3%
Aesop Funding Corp............... A1/P1 5.52% 09/19/97 33,300,000 33,208,092
Aesop Funding Corp............... A1/P1 5.52% 09/22/97 30,000,000 29,903,400
Aesop Funding Corp............... A1/P1 5.55% 10/02/97 40,000,000 39,808,833
Banc One Funding Corp............ A1/P1 5.53% 10/17/97 37,687,000 37,420,699
Beta Finance Inc................. A1/P1 5.53% 09/24/97 50,000,000 49,823,347
CC USA Inc....................... A1/P1 5.54% 11/05/97 21,500,000 21,284,940
CC USA Inc....................... A1/P1 5.55% 02/02/98 50,000,000 48,812,917
Corporate Asset Funding
Company........................ A1/P1 5.52% 10/17/97 50,000,000 49,647,333
Corporate Asset Funding
Company........................ A1/P1 5.54% 10/27/97 50,000,000 49,569,111
Enterprise Funding Corp. (b)..... A1/P1 5.52% 10/14/97 19,400,000 19,272,089
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 25,364,000 25,109,832
Enterprise Funding Corp. (b)..... A1/P1 5.55% 11/05/97 44,317,000 43,872,907
Golden Managers Acceptance
Corp........................... A1/P1 5.55% 09/19/97 45,000,000 44,875,125
Gotham Funding Corp.(b).......... A1/P1 5.70% 12/29/97 25,000,000 24,528,958
Riverwood Funding Corp........... A1/P1 5.52% 09/23/97 42,500,000 42,356,633
Riverwood Funding Corp........... A1/P1 5.52% 09/26/97 50,000,000 49,808,333
Sigma Finance Inc................ A1/P1 5.55% 10/14/97 50,000,000 49,668,542
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/04/97 35,000,000 34,655,911
World Omni Vehicle Leasing Inc... A1/P1 5.53% 11/05/97 50,000,000 49,500,764
--------------
TOTAL ASSET BACKED SECURITIES..... 743,127,766
--------------
AUTOMOBILES -- 3.5%
American Honda Finance Corp...... F1/P1 5.54% 10/22/97 30,000,000 29,764,550
American Honda Finance Corp...... F1/P1 5.55% 11/07/97 40,000,000 39,586,833
Daimler-Benz North America
Corp........................... A1/P1 5.61% 09/08/97 25,000,000 24,972,729
Daimler-Benz North America
Corp........................... A1/P1 5.51% 11/06/97 50,000,000 49,494,917
Daimler-Benz North America
Corp........................... A1/P1 5.52% 12/03/97 33,908,000 33,424,472
General Motors Acceptance Corp... P1/D1 5.40% 09/12/97 50,000,000 49,917,500
General Motors Acceptance Corp... P1/D1 5.82% 11/05/97 50,000,000 49,474,583
--------------
TOTAL AUTOMOBILES................. 276,635,584
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
61
<PAGE> 163
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
BANKING -- 3.3%
Bankers Trust, New York, Daily
Variable Rate (final maturity
11/7/97)*...................... A1/P1 5.72% 09/02/97 $ 25,000,000 $ 25,000,000
Bankers Trust, New York, Daily
Variable Rate (final maturity
1/9/98)*....................... A1/P1 5.74% 09/02/97 50,000,000 50,000,000
Svenska Handelsbanken, Inc....... A1/P1 5.52% 12/22/97 49,890,000 49,033,222
Unifunding, Inc.................. A1/P1 5.52% 10/20/97 36,000,000 35,729,520
Unifunding, Inc.................. A1/P1 5.55% 11/18/97 50,000,000 49,398,750
Unifunding, Inc.................. A1/P1 5.56% 12/11/97 50,000,000 49,220,056
--------------
TOTAL BANKING..................... 258,381,548
--------------
BROKERAGE SERVICES -- 3.1%
Lehman Brothers Holdings, Inc.... A1/F1 5.57% 09/19/97 50,000,000 49,860,750
Lehman Brothers Holdings, Inc.... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
Lehman Brothers Holdings, Inc.,
Weekly Variable Rate (final
maturity 4/03/98)*............. A1/F1 5.78% 09/08/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc......... A1/P1 5.53% 12/12/97 25,000,000 24,608,292
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Merrill Lynch & Co., Inc......... A1/P1 5.75% 02/27/98 25,000,000 24,285,243
Smith Barney Holdings, Inc....... A1/P1 5.52% 10/06/97 50,000,000 49,731,667
--------------
TOTAL BROKERAGE SERVICES.......... 247,466,716
--------------
CHEMICALS-DIVERSIFIED -- 0.2%
AKZO Nobel Inc................... A1/P1 5.62% 10/10/97 20,000,000 19,878,233
--------------
CONGLOMERATES -- 0.3%
B.A.T. Capital Corp.............. A1/P1 5.62% 09/03/97 25,000,000 24,992,194
--------------
CONSUMER NON-DURABLES -- 1.6%
Newell Co........................ A1/D1 5.54% 09/29/97 40,000,000 39,827,644
Newell Co........................ A1/D1 5.55% 10/29/97 50,000,000 49,552,917
Newell Co........................ A1/D1 5.56% 11/05/97 40,000,000 39,598,444
--------------
TOTAL CONSUMER NON-DURABLES....... 128,979,005
--------------
FINANCE COMPANIES -- 1.7%
Countrywide Home Loans, Inc...... A1/F1 5.63% 09/02/97 34,000,000 33,994,683
Countrywide Home Loans, Inc...... A1/F1 5.60% 09/19/97 25,000,000 24,930,000
Countrywide Home Loans, Inc...... A1/F1 5.52% 10/22/97 50,000,000 49,609,000
Countrywide Home Loans, Inc...... A1/F1 5.55% 11/19/97 25,000,000 24,695,521
--------------
TOTAL FINANCE COMPANIES........... 133,229,204
--------------
INSURANCE -- 0.3%
Marsh & Mclennan Companies,
Inc............................ A1/P1 5.75% 02/20/98 28,000,000 27,230,778
--------------
PUBLISHING -- 0.6%
Tribune Company.................. A1/F1 5.55% 10/22/97 20,000,000 19,842,750
Tribune Company.................. A1/F1 5.65% 12/22/97 25,000,000 24,560,556
--------------
TOTAL PUBLISHING.................. 44,403,306
--------------
RELOCATION SERVICES -- 0.7%
PHH Corporation.................. A1/P1 5.58% 09/19/97 25,000,000 24,930,250
PHH Corporation.................. A1/P1 5.52% 10/31/97 35,000,000 34,678,000
--------------
TOTAL RELOCATION SERVICES......... 59,608,250
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
62
<PAGE> 164
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
SOVEREIGN ISSUES -- 0.6%
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 11/05/97 $ 29,500,000 $ 29,205,451
Government Development Bank of
Puerto Rico.................... A1/TBW1 5.53% 12/03/97 15,700,000 15,475,712
--------------
TOTAL SOVEREIGN ISSUES............ 44,681,163
--------------
UTILITIES -- 1.7%
Duke Capital Corp................ 5.56% 10/06/97 88,955,000 88,473,770
Edison International............. A1/P1 5.60% 10/22/97 50,000,000 49,603,333
--------------
TOTAL UTILITIES................... 138,077,103
--------------
TOTAL DOMESTIC COMMERCIAL PAPER... 2,146,690,850
--------------
FOREIGN -- 4.6%
AIR TRANSPORTATION -- 1.0%
BAA PLC.......................... A1/P1 5.53% 12/03/97 76,410,000 75,318,419
--------------
BUILDING SOCIETY -- 0.9%
Bradford & Bingley Building
Society........................ A1/P1 5.62% 12/29/97 50,000,000 49,071,139
Bradford & Bingley Building
Society........................ A1/P1 5.56% 02/17/98 25,000,000 24,347,472
--------------
TOTAL BUILDING SOCIETY............ 73,418,611
--------------
OIL AND GAS -- 0.5%
Repsol International Finance..... A1/P1 4.98% 09/09/97 40,000,000 39,950,222
--------------
SOVEREIGN ISSUES -- 1.6%
Cades............................ A1/P1 5.39% 10/03/97 50,000,000 49,760,667
Cades............................ A1/P1 5.41% 10/10/97 25,000,000 24,853,479
Cades............................ A1/P1 5.44% 11/14/97 50,000,000 49,440,889
--------------
TOTAL SOVEREIGN ISSUES............ 124,055,035
--------------
TELECOMMUNICATIONS -- 0.6%
Alcatel Alsthom, Inc............. A1/P1 5.60% 12/16/97 50,000,000 49,175,556
--------------
TOTAL FOREIGN COMMERCIAL PAPER.... 361,917,843
--------------
TOTAL COMMERCIAL PAPER (AMORTIZED
COST $2,508,608,693)............. 2,508,608,693
--------------
CORPORATE BOND -- 15.3%
ASSET BACKED SECURITIES -- 2.5%
CC USA, Inc...................... A1/P1 6.18% 05/26/98 20,000,000 20,002,393
Ciesco, L.P., Monthly Variable
Rate (final maturity
2/10/98)*...................... A1/P1 5.57% 09/12/97 75,000,000 74,996,671
Sigma Finance, Inc................ A1/P1 5.92% 03/05/98 50,000,000 49,991,984
Sigma Finance, Inc., Daily
Variable Rate (final maturity
7/27/98)*........................ A1/P1 5.68% 09/02/97 50,000,000 49,999,104
--------------
TOTAL ASSET BACKED SECURITIES..... 194,990,152
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
63
<PAGE> 165
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
AUTOMOBILES -- 2.3%
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/6/98)*.............. F1/P1 5.79% 10/06/97 $ 50,000,000 $ 49,994,265
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 4/9/98)*.............. F1/P1 5.75% 10/09/97 24,000,000 24,001,339
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 7/27/98)*............. F1/P1 5.72% 10/27/97 45,000,000 45,000,000
American Honda Finance Corp.,
Quarterly Variable Rate (final
maturity 6/16/98)*............. F1/P1 5.81% 06/16/98 20,000,000 20,000,000
Ford Motor Credit Corp........... A1/P1 7.13% 12/01/97 25,000,000 25,089,658
General Motors Acceptance Corp.,
Quarterly Variable Rate (final
maturity 1/20/98)*............. F1/D1 5.82% 10/20/97 20,000,000 20,004,971
--------------
TOTAL AUTOMOBILES................. 184,090,233
--------------
BANKING -- 0.6%
Compagnie Bancaire USA Funding,
Daily Variable Rate (final
maturity 5/15/98)*............. A1/P1 5.79% 09/02/97 50,000,000 49,996,031
--------------
BROKERAGE SERVICES -- 4.5%
Bear Stearns Companies, Inc.,
Series B, Daily Variable Rate
(final maturity 3/17/98)*...... A1/P1 5.70% 09/02/97 75,000,000 75,000,000
Bear Stearns Companies, Inc.,
Series B, Monthly Variable Rate
(final maturity 4/1/98)*....... A1/P1 5.78% 09/02/97 18,000,000 18,015,439
C. S. First Boston, Inc., Daily
Variable Rate (final maturity
7/21/98)*...................... A1/P1 5.67% 09/02/97 50,000,000 50,000,000
C. S. First Boston, Inc., Weekly
Variable Rate (final maturity
5/15/98)*...................... A1/P1 5.61% 09/03/97 50,000,000 50,000,000
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
11/20/97)*..................... A1/P1 5.56% 09/03/97 50,000,000 49,997,874
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
1/29/98)*...................... A1/P1 5.59% 09/03/97 50,000,000 49,995,999
Merrill Lynch & Co., Inc., Weekly
Variable Rate (final maturity
3/4/98)*....................... A1/P1 5.61% 09/03/97 19,000,000 18,985,204
Merrill Lynch & Co., Inc.,
Quarterly Variable Rate (final
maturity 11/13/97)*............ A1/P1 5.68% 11/13/97 50,000,000 49,997,008
--------------
TOTAL BROKERAGE SERVICES.......... 361,991,524
--------------
CONGLOMERATES -- 0.3%
Philip Morris Co., Inc............ A1/P1 9.00% 05/15/98 22,625,000 23,054,018
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
64
<PAGE> 166
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
FINANCE COMPANIES -- 2.1%
Associates Corp., North America.. A1/P1 6.63% 11/15/97 $ 20,000,000 $ 20,037,809
CIT Group Holdings, Inc.......... A1/P1 7.00% 09/30/97 29,700,000 29,728,947
Dean Witter Discover & Co........ A1/P1 6.00% 03/01/98 15,000,000 15,009,675
Household Finance Corp., Daily
Variable Rate (final maturity
5/28/98)*...................... A1/P1 5.72% 09/02/97 50,000,000 50,000,000
Household Finance Corp., Monthly
Variable Rate (final maturity
9/15/98)*...................... A1/P1 5.70% 09/15/97 50,000,000 50,043,350
--------------
TOTAL FINANCE COMPANIES........... 164,819,781
--------------
LEASING -- 1.8%
Sanwa Business Credit Corp.,
Daily Variable Rate (final
maturity 4/17/98)*............. P1/D1 5.84% 09/02/97 25,000,000 25,000,000
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 12/08/97)*............ P1/D1 5.80% 09/08/97 30,000,000 30,011,824
Sanwa Business Credit Corp.,
Monthly Variable Rate (final
maturity 4/29/98)*............. P1/D1 5.76% 09/29/97 25,000,000 25,013,500
Sanwa Business Credit Corp.,
Quarterly Variable Rate (final
maturity 2/6/98)*.............. P1/D1 5.72% 11/06/97 25,000,000 24,998,918
USL Capital Corp., Series D,
Quarterly Variable Rate (final
maturity 4/22/98)*............... P1/F1 5.83% 10/22/97 34,000,000 34,022,741
--------------
TOTAL LEASING..................... 139,046,983
--------------
RELOCATION SERVICES -- 0.6%
PHH Corporation, Monthly Variable
Rate (final maturity
6/24/98)*...................... A1/P1 5.63% 09/24/97 50,000,000 50,000,000
--------------
RETAILING -- 0.6%
Sears Roebuck Acceptance Corp.... P1/F1 5.74% 10/02/97 50,000,000 49,999,569
--------------
TOTAL CORPORATE BOND (AMORTIZED
COST $1,217,988,291)............. 1,217,988,291
--------------
MASTER NOTE -- 7.5%
Goldman Sachs Group L.P. (final
maturity 1/16/98)*............. A1/P1 5.83% 09/02/97 300,000,000 300,000,000
Morgan Stanley Group, Inc. (final
maturity 3/24/98)*............. A1/P1 5.79% 09/02/97 300,000,000 300,000,000
--------------
TOTAL MASTER NOTE (AMORTIZED COST
$600,000,000).................... 600,000,000
--------------
</TABLE>
- ---------------
See Notes to Financial Statements.
65
<PAGE> 167
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS(C) -- 23.6%
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $50,833,610
(Collateralized by $50,930,000
various U.S. Government
Obligations, 6.15%-7.55%,
1/27/00 -- 6/10/04, market
value -- $51,819,652)............ 5.60% 09/02/97 $ 50,802,000 $ 50,802,000
CIBC Wood Gundy Securities, Inc.,
dated 8/29/97, with a maturity
value of $80,049,956
(Collateralized by $80,725,000
U.S. Government Obligations,
6.40%-6.50%, 5/2/01 -- 2/25/02,
market value -- $81,602,028)..... 5.62% 09/02/97 80,000,000 80,000,000
First Chicago Capital Markets,
Inc., dated 8/29/97, with a
maturity value of $150,093,833
(Collateralized by $157,483,000
various U.S. Government
Obligations, 0.00% -- 7.89%,
9/11/97 -- 8/15/03, market
value -- $153,001,916)........... 5.63% 09/02/97 150,000,000 150,000,000
First National Bank of Chicago,
dated 8/29/97, with a maturity
value of $50,031,278
(Collateralized by $51,390,000
Federal National Mortgage
Association Note, 7.02%, 8/28/07,
market value -- $51,004,575)..... 5.63% 09/02/97 50,000,000 50,000,000
Fuju Securities, Inc., dated
8/29/97, with a maturity value of
$300,187,000 (Collateralized by
$318,677,000 various U.S.
Government Obligations, 0.00% --
10.35%, 9/4/97 -- 8/15/26, market
value -- $306,000,902)........... 5.61% 09/02/97 300,000,000 300,000,000
HSBC Securities, Inc., dated
8/29/97, with a maturity value of
$350,218,556 (Collateralized by
$351,407,000 various U.S.
Government Obligations, 0.00%-
9.25%, 9/2/97 -- 6/15/07, market
value -- $357,001,503)........... 5.62% 09/02/97 350,000,000 350,000,000
Lehman Brothers, Inc., dated
8/29/97, with a maturity value of
$41,031,969 (Collateralized by
$69,764,000 U.S. Treasury Notes,
0.00%, 8/15/03 -- 11/15/08,
market value -- $41,828,863)..... 5.48% 09/02/97 41,007,000 41,007,000
</TABLE>
- ---------------
See Notes to Financial Statements.
66
<PAGE> 168
<TABLE>
<CAPTION>
RATINGS
ASSIGNED BY AMORTIZED
N.R.S.R.O. MATURITY PRINCIPAL COST
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
- ---------------------------------- ------------ ----- -------- ------------ --------------
REPURCHASE AGREEMENTS(C) -- (CONTINUED)
<S> <C> <C> <C> <C> <C>
Merrill Lynch Securities, dated
8/29/97, with a maturity value of
$100,062,444 (Collateralized by
$115,399,948 Federal National
Mortgage Association Notes,
5.50% -- 9.00%, 3/1/03 -- 9/1/26,
market value -- $102,002,243).... 5.62% 09/02/97 $100,000,000 $ 100,000,000
NationsBanc, Inc., dated 8/29/97,
with a maturity value of
$230,143,750 (Collateralized by
$233,746,164 various U.S.
Government Obligations, 0.00% --
9.50%, 9/2/97 -- 8/1/27, market
value -- $234,600,486)........... 5.63% 09/02/97 230,000,000 230,000,000
Nomura Securities, Inc., dated
8/29/97, with a maturity value of
$200,124,667 (Collateralized by
$265,004,426 Government National
Mortgage Association Notes,
6.00% -- 10.00%,
1/1/00 -- 8/20/27, market
value -- $204,000,000)........... 5.61% 09/02/97 200,000,000 200,000,000
Prudential Securities, Inc., dated
8/29/97, with a maturity value of
$250,155,556 (Collateralized by
$324,844,908 various U.S.
Government Obligations, 0.00%-
10.00%, 1/15/98 -- 8/1/27, market
value -- $255,000,250)........... 5.60% 09/02/97 250,000,000 250,000,000
Smith Barney, Inc., dated 8/29/97,
with a maturity value of
$80,049,778 (Collateralized by
$117,897,650 various U.S.
Government Obligations,0.00% --
8.00%, 7/15/08 -- 2/1/27, market
value -- $81,600,397)............ 5.60% 09/02/97 80,000,000 80,000,000
--------------
TOTAL REPURCHASE AGREEMENT
(AMORTIZED COST
$1,881,809,000).................. 1,881,809,000
--------------
TOTAL INVESTMENTS -- 100.6%
(AMORTIZED COST
$8,017,514,637)(a)............... 8,017,514,637
--------------
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.6%)................. (45,980,584)
--------------
NET ASSETS -- 100.0%.............. $7,971,534,053
==============
</TABLE>
- ---------
Percentages indicated are based on net assets of $7,971,534,053.
(a) Cost for federal income tax and financial reporting purposes are
substantially the same.
(b) Private placement security.
(c) The range of coupon rates and maturity dates are shown.
PLC -- Public Liability Company.
N.R.S.R.O. Nationally Recognized Statistical Ratings Organization. Rating
agencies that are included within the N.R.S.R.O. category are: S&P,
Moody's, Fitch Investors Services, Duff & Phelps, IBCA, and Thomsons
Bank Watch.
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.
TBW1 -- Highest rating assigned by Thomsons Bank Watch.
Note: S&P and Moody's ratings have been used, unless another service has
assigned the security a higher rating.
* Variable rate security. Maturity date reflects the next interest rate change
date.
See Notes to Financial Statements.
67
<PAGE> 169
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (amortized cost $6,135,705,637).................... $6,135,705,637
Repurchase agreements (cost $1,881,809,000)............................................ 1,881,809,000
Cash................................................................................... 26,337
Interest Receivable.................................................................... 41,624,568
Receivable for capital shares sold..................................................... 184,015,784
Receivable for investment securities sold.............................................. 2,083,305,000
Prepaid expenses....................................................................... 1,290,198
--------------
Total Assets....................................................................... 10,327,776,524
--------------
LIABILITIES:
Dividends payable...................................................................... 35,043,189
Payable for investment securities purchased............................................ 1,981,823,530
Payable for capital shares redeemed.................................................... 335,925,601
Investment advisory fees payable....................................................... 602,283
Administration fees payable............................................................ 660,579
Special management fees payable (Pacific Horizon Shares)............................... 617,556
Shareholder service fees payable (Horizon Service Shares).............................. 661,706
Shareholder service fees payable (S Shares)............................................ 27,167
Shareholder service fees payable (X Shares)............................................ 98,980
Shareholder service fees payable (Y Shares)............................................ 3,830
12b-1 fees payable (X Shares).......................................................... 100,240
12b-1 fees payable (Y Shares).......................................................... 11,489
Custodian and fund accounting fees payable............................................. 146,903
Transfer agent fees payable............................................................ 27,764
Other accrued expenses................................................................. 491,654
--------------
Total Liabilities.................................................................. 2,356,242,471
--------------
NET ASSETS............................................................................. $7,971,534,053
==============
Net Assets:
Pacific Horizon Shares................................................................. $2,257,973,852
Horizon Shares......................................................................... 2,021,874,087
Horizon Service Shares................................................................. 3,129,562,849
S Shares............................................................................... 118,539,347
Y Shares............................................................................... 36,737,587
X Shares............................................................................... 406,846,331
--------------
Total.............................................................................. $7,971,534,053
==============
Shares Outstanding ($0.001 par value, 120 billion):
Pacific Horizon Shares.............................................................. 2,258,185,450
Horizon Shares...................................................................... 2,022,168,081
Horizon Service Shares.............................................................. 3,129,427,668
S Shares............................................................................ 118,538,233
Y Shares............................................................................ 36,737,583
X Shares............................................................................ 406,811,237
--------------
Total.............................................................................. 7,971,868,252
==============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE........................ $1.00
===
COMPOSITION OF NET ASSETS:
Shares of common stock, at par......................................................... $ 7,971,868
Additional paid-in capital............................................................. 7,963,495,319
Accumulated undistributed net investment income........................................ 3,514,158
Accumulated net realized losses on investment transactions............................. (3,447,292)
--------------
NET ASSETS, AUGUST 31, 1997............................................................ $7,971,534,053
==============
</TABLE>
- ---------------
See Notes to Financial Statements.
68
<PAGE> 170
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended August 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $209,184,808
------------
EXPENSES:
Investment advisory fees............................................. 3,360,652
Administration fees.................................................. 3,679,805
Special management fees (Pacific Horizon Shares)..................... 3,625,502
Shareholder service fees (Horizon Service Shares).................... 3,857,672
Shareholder service fees (S Shares).................................. 53,805
Shareholder service fees (X Shares).................................. 375,826
Shareholder service fees (Y Shares).................................. 3,907
12b-1 fees (S Shares)................................................ 16,388
12b-1 fees (X Shares)................................................ 450,991
12b-1 fees (Y Shares)................................................ 11,722
Custodian and fund accounting fees................................... 380,182
Transfer Agent fees.................................................. 162,342
Legal fees........................................................... 295,692
Other expenses....................................................... 683,860
------------
Total Expenses................................................. 16,958,346
Less: Fee waivers.................................................... --
Expenses paid by third parties......................................... --
------------
Total Net Expenses..................................................... 16,958,346
------------
NET INVESTMENT INCOME.................................................. 192,226,462
------------
NET REALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions........................ 22,846
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $192,249,308
============
</TABLE>
- ---------------
See Notes to Financial Statements.
69
<PAGE> 171
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
---------------- ----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................................. $ 192,226,462 $ 313,627,480
Net realized gains on investment transactions......................... 22,846 172,885
---------------- ----------------
Change in net assets resulting from operations........................ 192,249,308 313,800,365
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Pacific Horizon Shares................................................ (57,653,267) (110,595,534)
Horizon Shares........................................................ (46,310,824) (79,709,197)
Horizon Service Shares................................................ (79,626,947) (119,808,778)
S Shares.............................................................. (629,524)(b) --
Y Shares.............................................................. (70,391)(c) --
X Shares.............................................................. (7,329,789) (2,322,836)(a)
---------------- ----------------
Change in net assets from shareholder distributions.................... (191,620,742) (312,436,345)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares Issued........................................... 24,957,660,701 42,442,585,809
Dividends reinvested.................................................. 89,864,407 177,262,119
Cost of shares redeemed............................................... (24,227,328,843) (40,881,572,699)
---------------- ----------------
Change in net assets from capital share transactions................... 820,196,265 1,738,275,229
---------------- ----------------
Change in net assets................................................... 820,824,831 1,739,639,249
NET ASSETS
Beginning of Period................................................... 7,150,709,222 5,411,069,973
---------------- ----------------
End of Period......................................................... $ 7,971,534,053 $ 7,150,709,222
================ ================
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
See Notes to Financial Statements.
70
<PAGE> 172
PACIF IC HORIZON PRIME FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. On August 31, 1997, the Company
operated as a series company comprised of seventeen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Prime Fund (the
"Prime Fund").
The Prime Fund issues six classes of shares (Pacific Horizon Shares, Horizon
Shares, Horizon Services Shares, effective July 22, 1996, X Shares, S Shares
effective April 7, 1997 and effective July 10, 1997, Y Shares). Pacific Horizon
Shares have a Special Management Services Agreement/Plan while the Horizon
Service Shares have a Shareholder Services Plan. X, S and Y Shares each have a
Distribution and Services Plan.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. The BISYS Group, Inc. ("BISYS"), through its wholly-owned subsidiary
BISYS Fund Services, Limited Partnership, served as the Fund's administrator
through September 15, 1997. Concord Financial Group, Inc. (the "Distributor"),
an indirect, wholly-owned subsidiary of BISYS, served as the distributor of the
Fund's shares through September 15, 1997. BISYS Fund Services, Inc. ("BISYS
Ohio"), also a wholly-owned subsidiary of BISYS, served as transfer agent and
dividend disbursing agent of the Fund through October 24, 1997.
Change in Administrator
Effective September 15, 1997, Bank of America will assume the responsibility
of administrator for each of the Funds pursuant to the terms of an
Administration Agreement between the Company and Bank of America (the
"Administration Agreement").
Bank of America has entered into an agreement with PFPC Inc. ("PFPC"), an
indirect wholly-owned subsidiary of PNC Bank Corp., pursuant to which PFPC has
agreed to provide certain sub-administration services to the Fund, including,
among other things, assisting in the developing and monitoring of compliance
procedures, participating in periodic updating of the Fund's prospectuses and
statements of additional information, providing periodic reports to the
Company's Board and providing certain record-keeping services. Bank of America
will bear all fees and expenses charged by PFPC for such services.
In addition, pursuant to authority granted in the Administration Agreement,
Bank of America has entered into an agreement with The Bank of New York ("BONY")
under which BONY has agreed to provide certain accounting, bookkeeping, pricing
and dividend and
71
<PAGE> 173
distribution calculation services for the Fund. The Fund bear all fees and
expenses charged by BONY for these services.
Change in Distributor
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), will
serve as principal underwriter and distributor of shares of the Fund.
Change In Transfer Agent
Effective October 24, 1997, PFPC will serve as the Fund's transfer agent and
dividend disbursing agent.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the 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.
PORTFOLIO VALUATIONS:
The securities of the Prime Fund 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 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.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Prime Fund records security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses from security transactions are recorded on an
identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of the fund. Direct expenses of a fund are charged to that fund while general
Company expenses are allocated among the Company's respective portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
REPURCHASE AGREEMENT:
The Prime Fund's custodian and other banks acting in a sub-custodian
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, exceeds the repurchase
72
<PAGE> 174
price. In the event of the seller's default of the obligation to repurchase, the
Prime 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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Prime Fund's net investment income is declared as a dividend daily, and
paid monthly, to shareholders of record at the close of business on record date.
Net realized gains on portfolio securities, if any, are distributed at least
annually. However, to the extent that net realized gains can be offset by
capital loss carryovers, 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.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of February 28, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
------------- --------------
<S> <C> <C>
Prime Fund $ 2,742 $182,342
</TABLE>
FEDERAL INCOME TAXES:
It is the Prime Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute timely, all of its net investment company taxable income and net
capital gains to shareholders. Therefore, no federal income tax provision is
required.
At February 28, 1997, the Prime Fund had the following capital loss
carryovers:
<TABLE>
<CAPTION>
CAPITAL
LOSS EXPIRATION
FUND CARRYOVER DATE
- ---------------------- ---------- ----------
<S> <C> <C>
Prime Fund $ 744,962 2002
2,725,176 2003
----------
$3,470,138
==========
</TABLE>
To the extent that these carryovers are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders.
Addition-
73
<PAGE> 175
ally, during the year, the Prime Fund utilized $172,885 of its available capital
loss carryover to offset realized capital gains for Federal income tax purposes.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Prime Fund has an Investment Advisory Agreement with Bank of America.
For the six months ended August 31, 1997, the Fund had an Administration
Agreement with BISYS. 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 each
Fund's first $3 billion of net assets, plus 0.09% of each Fund's next $2 billion
of net assets, plus 0.08% of each Fund's net assets in excess of $5 billion.
BISYS was entitled to a fee from the Prime Fund which is accrued daily and
payable monthly, at an annual rate of 0.10% of the Fund's first $7 billion of
net assets, plus 0.09% of the Fund's next $3 billion of net assets, plus 0.08%
of the Fund's net assets in excess of $10 billion.
The Prime Fund has entered into a Special Management Services Agreement (the
"Services Agreement") pursuant to which they agree to pay Bank of America and
BISYS a fee for various services relating to Pacific Horizon Shares. The special
management services fee is accrued daily at an annual rate of 0.32% of the
average daily net assets of the outstanding Pacific Horizon Shares of the Prime
Fund. Fees under the Services Agreement are borne solely by the Pacific Horizon
Shares.
Effective January 1997, the Services Agreement was terminated. The Prime
Fund has adopted a Special Management Services Plan (the "Services Plan")
pursuant to which Service Organizations agree to provide certain services to
their clients who are beneficial owners of Pacific Horizon Shares in return for
a payment by the Prime Fund of a fee at an annual rate 0.32% of the average
daily net assets of the outstanding Pacific Horizon Shares. Fees under the
Services Plan are borne solely by the Pacific Horizon Shares. Service
organizations include BISYS, Bank of America and its affiliates. For the six
months ended August 31, 1997, the Prime Fund was advised that BISYS, Bank of
America and their affiliates earned the following amounts pursuant to the
Services Agreement and Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES BISYS
------------------- -------------------
<S> <C> <C>
$3,346,248 $22,110
</TABLE>
The Prime Fund has also adopted a Shareholder Services Plan (the "Horizon
Services Plan") pursuant to which Service Organizations agree to provide certain
services to their clients who are beneficial owners of Horizon Service Shares in
return for payment by the Prime Fund of a fee at an annual rate of 0.25% of the
average daily net assets of the Horizon Service Shares, which are borne solely
by the Horizon Service Shares. Service Organizations may include the
Distributor, Bank of America and their affiliates. For the six months ended
August 31, 1997, the Prime Fund was advised that BISYS, Bank of America and its
affiliates earned
74
<PAGE> 176
the following amounts pursuant to the Horizon Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES
------------------------------------------
<S> <C>
$3,166,103
</TABLE>
The Prime Fund has adopted the Distribution and Services Plan under which
the Prime Fund pays the Distributor and Service Organizations for the provision
of support services with respect to the beneficial owners of X Shares. Payments
for distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.30% and 0.25%, respectively, of the average daily net assets of
the Prime Fund's X Shares. For the six months ended August 31, 1997, the Prime
Fund was advised that Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES
------------------------------------------
<S> <C>
$374,472
</TABLE>
The Prime Fund has adopted the Distribution and Services Plan under which
the Prime Fund pays the Distributor and Service Organization for the provision
of support service with respect to the beneficial owners of Y shares. Payments
for distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%; respectively, of the average daily net assets of
the Prime Fund's Y shares. For the period from July 10, 1997 (date of inception)
to August 31, 1997, the Prime Fund was advised that Bank of America and its
affiliates earned the following amounts pursuant to the Distribution and
Services Plan.
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
AFFILIATES
------------------------------------------
<S> <C>
$3,907
</TABLE>
The Prime Fund has adopted the Distribution and Services Plan under which
the Fund pays the Distributor and Service Organization for the provision of
support services with respect to the beneficial owners of S shares. Payments for
the distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.75% and 0.25%, respectively, of the average daily net assets of
the Prime Fund's S shares. For the period from April 7, 1997(date of inception)
to August 31, 1997 the Fund was advised that Bank of America and its affiliates
earned $31,874 pursuant to the Distribution and Services Plan.
BISYS Ohio served the Prime Fund as transfer agent and dividend disbursing
agent. In these capacities, BISYS Ohio earned $162,342, for the six months ended
August 31, 1997.
For the six months ended August 31, 1997, the Prime Fund incurred legal
charges totaling $295,692, which were earned by a law firm, a partner of which
serves as Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in these capacities.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Company is entitled to an annual retainer of $25,000,
75
<PAGE> 177
plus $1,000 for each day the Director participates in all or part of a Board or
Committee meeting and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The 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 pursuant to the Retirement Plan amounted to
$15,064, for the Prime Fund, for the six months ended August 31, 1997.
76
<PAGE> 178
NOTE 5 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Prime Fund (at $1.00 per share) for the
periods indicated are summarized below:
<TABLE>
<CAPTION>
PRIME FUND
-----------------------------------------
SIX MONTHS ENDED
AUGUST 31, 1997 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1997
----------------- ------------------
<S> <C> <C>
Pacific Horizon Shares
Issued.................................. 1,421,450,092 4,320,031,345
Reinvest................................ 44,139,878 99,202,915
Redeemed................................ (1,500,161,348) (4,326,928,364)
------------- -------------
Net increase/ (decrease).................. (34,571,378) 92,305,896
============= =============
Horizon Shares
Issued.................................. 9,219,317,384 15,114,015,999
Reinvest................................ 13,412,109 25,723,399
Redeemed................................ (8,920,510,978) (15,081,065,299)
------------- -------------
Net increase/ (decrease).................. 312,218,515 58,674,099
============= =============
Horizon Service Shares
Issued.................................. 13,634,158,320 22,771,276,975
Reinvest.............................. 26,468,915 50,011,411
Redeemed.............................. (13,476,384,289) (21,437,775,542)
------------- -------------
Net increase/
(decrease).............................. 184,242,946 1,383,512,844
============= =============
X Shares
Issued.................................. 518,517,302 237,259,971
Reinvest................................ 5,573,041 2,324,394
Redeemed................................ (321,059,977) (35,803,494)
------------- -------------
Net increase.............................. 203,030,366 203,780,871(a)
============= =============
S Shares
Issued.................................. 122,180,115 --
Reinvest................................ 270,464 --
Redeemed................................ (3,912,346) --
------------- -------------
Net increase.............................. 118,538,233(b) --
============= =============
Y Shares
Issued.................................. 42,037,008 --
Reinvest................................ -- --
Redeemed................................ (5,299,425) --
------------- -------------
Net increase.............................. 36,737,583(c) --
============= =============
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Period from April 7, 1997 (inception date) to August 31, 1997.
(c) Period from July 10, 1997 (inception date) to August 31, 1997.
77
<PAGE> 179
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income............. 0.0258 0.0492 0.0539 0.0424 0.0287 0.0340
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------ ------ ------ ------ ------ ------
Total income from investment
operations........................ 0.0258 0.0492 0.0543 0.0197 0.0271 0.0340
Less dividends to shareholders from
net investment income............. (0.0257) (0.0490) (0.0539) (0.0422) (0.0287) (0.0341)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------ ------ ------ ------ ------ ------
Net change in net asset value per
share............................. 0.0001 0.0002 0.0004 0.0008 (0.0016) (0.0001)
------ ------ ------ ------ ------ ------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total return....................... 2.59%(d) 5.01% 5.53% 4.30%+ 2.91% 3.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)........................ $ 2,258 $ 2,292 $ 2,200 $ 1,129 $ 1,216 $ 992
Ratio of expenses to average net
assets............................ 0.55%(c) 0.55% 0.55% 0.51% 0.52% 0.55%
Ratio of net investment income to
average net assets................ 5.11%(c) 4.92% 5.37% 4.19% 2.86% 3.42%
Ratio of expenses to average net
assets*........................... (b) (b) 0.56% 0.56% 0.53% (a)
Ratio of net investment income to
average net assets*............... (b) (b) 5.36% 4.14% 2.85% (a)
</TABLE>
- ---------------
<TABLE>
<S> <C>
* 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
Advisor. Without this capital contribution, the total return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
</TABLE>
See Notes to Financial Statements.
78
<PAGE> 180
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0273 0.0524 0.0571 0.0461 0.0319 0.0372
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0232) (0.0016) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0273 0.0524 0.0575 0.0229 0.0303 0.0372
Less dividends to shareholders from
net investment income............. (0.0273) (0.0522) (0.0571) (0.0454) (0.0319) (0.0372)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. -- 0.0002 0.0004 0.0008 (0.0016) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.76%(d) 5.34% 5.86% 4.63%+ 3.24% 3.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 2,022 $ 1,710 $ 1,651 $ 662 $ 3,840 $ 10,301
Ratio of expenses to average net
assets.......................... 0.23%(c) 0.23% 0.23% 0.16% 0.20% 0.23%
Ratio of net investment income to
average net assets.............. 5.43%(c) 5.24% 5.69% 4.11% 3.19% 3.59%
Ratio of expenses to average net
assets*......................... (b) (b) 0.24% 0.23% 0.21% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.68% 4.04% 3.18% (a)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
79
<PAGE> 181
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, --------------------------------------------------------------------
1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.0261 0.0499 0.0546 0.0431 0.0294 0.0345
Net realized gains/(losses) on
investment transactions......... -- -- 0.0004 (0.0227) (0.0016) --
------- ------- ------- ------- ------- -------
Total income from investment
operations........................ 0.0261 0.0499 0.0550 0.0204 0.0278 0.0345
Less dividends to shareholders from
net
investment income.................. (0.0260) (0.0497) (0.0546) (0.0429) (0.0294) (0.0347)
Increase due to voluntary capital
contribution from Investment
Advisor........................... -- -- -- 0.0233 -- --
------- ------- ------- ------- ------- -------
Net change in net asset value per
share............................. 0.0001 0.0002 0.0004 0.0008 (0.0016) (0.0002)
------- ------- ------- ------- ------- -------
NET ASSET VALUE PER SHARE, END OF
PERIOD............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return....................... 2.63%(d) 5.08% 5.60% 4.37%+ 2.98% 3.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(millions)...................... $ 3,130 $ 2,945 $ 1,561 $ 864 $ 839 $ 793
Ratio of expenses to average net
assets.......................... 0.48%(c) 0.48% 0.48% 0.44% 0.45% 0.48%
Ratio of net investment income to
average net assets.............. 5.18%(c) 5.00% 5.44% 4.31% 2.94% 3.49%
Ratio of expenses to average net
assets*......................... (b) (b) 0.49% 0.48% 0.46% (a)
Ratio of net investment income to
average net assets*............. (b) (b) 5.43% 4.27% 2.93% (a)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Advisor. Without this capital contribution, the total return
would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
80
<PAGE> 182
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997(a)
----------- ------------
<S> <C> <C>
X SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....... $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income.............................. 0.0245 0.0282
Net realized gains/(losses) on investment
transactions..................................... -- --
-------- --------
Total income from investment operations.............. 0.0245 0.0282
Less dividends to shareholders from net investment
income............................................. (0.0245) (0.0281)
-------- --------
Net change in net asset value per share.............. -- 0.0001
-------- --------
NET ASSET VALUE PER SHARE, END OF PERIOD............. $ 1.00 $ 1.00
======== ========
Total return......................................... 2.48%(d) 2.84%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)............. $ 407 $ 204
Ratio of expenses to average net assets............ 0.78%(c) 0.78%(c)
Ratio of net investment income to average net
assets........................................... 4.90%(c) 4.73%(c)
Ratio of expenses to average net assets*........... (b) (b)
Ratio of net investment income to average net
assets*.......................................... (b) (b)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(a) Period from July 22, 1996 (inception date) to February 28, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
81
<PAGE> 183
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
S SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0197
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0197
Less dividends to shareholders from net investment
income................................................. (0.0197)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 119
Ratio of expenses to average net assets................ 0.78%(c)
Ratio of net investment income to average net assets... 4.94%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(a) Period from April 7, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
82
<PAGE> 184
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1997
(UNAUDITED)(a)
---------------
<S> <C>
Y SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........... $ 1.00
--------
Income from Investment Operations:
Net investment income.................................. 0.0065
Net realized gains/(losses) on investment
transactions......................................... --
--------
Total income from investment operations.................. 0.0065
Less dividends to shareholders from net investment
income................................................. (0.0065)
--------
Net change in net asset value per share.................. --
--------
NET ASSET VALUE PER SHARE, END OF PERIOD................. $ 1.00
========
Total return............................................. 2.48%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions)................. $ 37
Ratio of expenses to average net assets................ 1.23%(c)
Ratio of net investment income to average net assets... 4.50%(c)
Ratio of expenses to average net assets*............... (b)
Ratio of net investment income to average net
assets*.............................................. (b)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(a) Period from July 10, 1997 (inception date) to August 31, 1997.
(b) Fees paid by third parties had no effect on the ratios.
(c) Annualized.
(d) Not annualized.
See Notes to Financial Statements.
83
<PAGE> 185
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