<PAGE> 1
[DESKTOP FRONT COVER]
TIME HORIZON FUNDS
------------------
PORTFOLIO 1
PORTFOLIO 2
PORTFOLIO 3
ANNUAL REPORT
JUNE 30, 1996
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TIME HORIZON FUNDS
3435 Stelzer Road, Columbus, OH 43219
1-800-247-9728
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<S> <C>
MANAGER INDEPENDENT AUDITORS
Bank of America National Trust and Ernst & Young, LLP
Savings Association 515 S. Flower Street
555 California Street Los Angeles, CA 90071
San Francisco, CA 94104
DISTRIBUTOR FUND COUNSEL
Concord Financial Group, Inc. Vedder, Price, Kaufman
3435 Stelzer Road & Kammholz
Columbus, OH 43219 222 S. LaSalle Street
Chicago, IL 60601
</TABLE>
SUB-ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
FUND SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY, NOR ARE THEY OBLIGATIONS
OF OR OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
The Time Horizon Funds are sponsored and distributed by Concord Financial Group,
Inc., which is unaffiliated with Bank of America. Bank of America serves as
manager 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' prospectus.
This material must be preceded or accompanied by a current prospectus.
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<S> <C>
NOT INVESTMENTS IN THE TIME HORIZON FUNDS ARE NOT BANK DEPOSITS
FDIC AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, BANK OF AMERICA
INSURED OR ANY OF ITS AFFILIATES. MUTUAL FUNDS ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
</TABLE>
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..................................
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CONTENTS
<S> <C>
UNDERSTANDING YOUR
SHAREHOLDER REPORT 2-4
TIME HORIZON FUND FACTS 5
LETTER FROM THE MANAGER 6-13
STATEMENTS OF ASSETS
AND LIABILITIES 14
STATEMENTS OF OPERATIONS 15
STATEMENTS OF CHANGES
IN NET ASSETS 16
SCHEDULES OF PORTFOLIO
INVESTMENTS 17-40
NOTES TO FINANCIAL STATEMENTS 41-45
FINANCIAL HIGHLIGHTS 46-48
REPORT OF INDEPENDENT AUDITORS 49
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<PAGE> 4
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.
[GRAPHICS]
The LETTER FROM THE MANAGER
provides a brief overview of the
economy and how it affects the
financial markets.
Because a picture or chart can help clarify the
text, The TIME HORIZON FUND FACTS illustrate the
most important features of the Funds. The
illustrations represent the current asset allocation
and target asset allocation ranges for each
portfolio, as well as a brief description of the
[GRAPHICS] Manager's investment strategy.
In annual reports, mutual funds that are not "money
market" funds are required by the Securities and
Exchange Commission
(SEC) to provide shareholders with a comparison of a hypothetical $10,000
investment in the
Fund to a benchmark index of the
broader market. The performance
of the benchmark index depicts
the aggregate performance of
investments similar to those in
the Fund for the same time
period. While the benchmark index
provides a general representation
of the market, there are two
reasons why it should be used
only as a guide. First, the Fund,
in
its prospectus, must clearly define which investments can be made by the Fund.
The index does not necessarily have the same limitations. Second, the index does
not reflect any expenses that
[GRAPHIC]
2
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accompany a real investment, such as sales charges, management fees, portfolio
transaction costs or the cash reserves required to provide daily liquidity. The
performance of the Fund must show these costs as well as any front-end or
deferred sales charges.
The financial statements summarize and describe the Funds' financial
transactions. They are broken down into four different statements, which are
illustrated below:
The SCHEDULES OF PORTFOLIO INVESTMENTS list each investment holding in the Funds
as of the date of the financial statements. Investments may be grouped by
category (by industry or security type, for example). The percentage of each
Fund's net assets represented by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
[GRAPHICS]
PORTFOLIO HOLDINGS WITH SHARES AND MARKET VALUE
AS OF REPORT DATE
The STATEMENTS OF ASSETS AND LIABILITIES list all the assets and liabilities of
the Funds as of the date of the Statements. This is an individual fund's
"balance sheet." Also disclosed in the Statements are the Funds' net asset
values per share and their maximum offering prices per share as of the date of
the Statements. The Statements also list the accounts that comprise the Funds'
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
[GRAPHICS] 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
3
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The STATEMENTS OF OPERATIONS show the amount of dividend and interest income
earned from each Fund's investments, the expenses incurred by the Funds from
their operations and any gains or losses, both realized and unrealized, by the
Funds from holding and/or selling any investments.
INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
[GRAPHICS]
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
The STATEMENTS OF CHANGES IN NET ASSETS show the changes in the net assets of
the Funds during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:
OPERATIONS: SEE STATEMENTS OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
[GRAPHICS] NET REALIZED GAINS: TOTAL REALIZED GAINS
DISTRIBUTED TO SHAREHOLDERS DURING THE PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED DURING
THE PERIODS
The NOTES TO FINANCIAL STATEMENTS are footnotes to the Statements listed above.
These footnotes include information on accounting methods used by the Funds,
contractual arrangements between the Funds and their service providers, certain
transactions effected by the Funds and other general information about the
Funds.
The FINANCIAL HIGHLIGHTS show, 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 Funds. It also shows key
data and ratios such as the total investment return for each period, the
portfolio turnover rate for the Funds, the ratio of expenses to average net
assets, the ratio of net investment income to average net assets, and the
average commission rate paid on portfolio transactions.
4
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TIME HORIZON FUND FACTS
The Time Horizon Funds offer three asset allocation funds that target
specific investment time horizons, shown below. Each Fund seeks to provide
long-term investors maximum total return over its stated time period, while also
increasingly emphasizing capital preservation as the Fund approaches its target
time horizon.
To accomplish this, the investment management team invests in a combination
of stocks, bonds and a small amount of cash. The mix among these asset
categories will change according to current market conditions, as well as to how
close each Fund is to its target time horizon. By selecting the Time Horizon
Fund that most closely matches the expected timing of major investment goals,
such as sending a child to college, retirement or purchasing a home, you'll be
investing in a portfolio of investments that is managed with a time horizon
similar to that of your own goals. Of course, no mutual fund can guarantee that
an investor's goals will be met.
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PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
<S> <C> <C> <C>
TIME HORIZON 2005 2015 2025
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
ASSET ALLOCATION(1)
(AS OF 6/30/96)
BONDS 64% 48% 27%
CASH 2% 5% 10%
STOCKS 34% 47% 63%
- -------------------------------------------------------------------------------------------------
CURRENT ALLOCATION RANGES(2)
STOCKS 15%-45% 30%-70% 40%-100%
BONDS 55%-85% 30%-70% 0%-60%
CURRENT TARGET
ASSET ALLOCATION
BONDS/CASH 65% 50% 30%
STOCKS 35% 50% 70%
- -------------------------------------------------------------------------------------------------
<FN>
- ------------------------------
(1) The portfolio's composition is subject to change. Percentages shown are
percentages of portfolio value.
(2) Under normal market conditions, each portfolio is currently managed within
the strategic asset allocation ranges shown, based on the portfolio
manager's evaluation of the anticipated returns and risks for the various
asset classes in the near term. The portfolio will change its focus over
time, increasingly emphasizing capital preservation as it nears its target
time horizon. After a portfolio reaches its time horizon target date, it is
anticipated that it will continue to be managed with a predominant emphasis
on capital preservation.
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5
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LETTER FROM THE MANAGER
Dear Shareholder:
The investment performance of each of the three Time [PHOTO]
Horizon Funds, from their inception on September 5, David R. Johnsen
1995, through their fiscal year end on June 30, 1996, Senior Vice
was heavily influenced by two major factors. First, the President
Funds were in a start-up phase during much of the Bank of America,
period as we worked to build each Fund's portfolio with Illinois
the new money that investors were entrusting to us. Investment
Second, this period can be characterized as a time of Advisors Division
great uncertainty in the financial markets. Strong Mr. Johnsen plays
corporate profits and low inflation buoyed stock prices a key role in the
overall. At the same time, however, investors worried portfolio
that an uptick in economic growth could lead to higher management of the
inflation. Those concerns were reflected in higher bond Time Horizon Funds
yields, which caused the bond market to lose ground
during much of the period.
A TIME OF MARKET INSTABILITY
During the first half of 1996, the S&P 500 index -- a widely used indicator of
general stock market performance -- rose more than 10%. However, underlying this
broad strength was a great deal of turbulence in individual economic sectors. In
some cases, the market leaders one month had become the market laggards the
next.
The bond market has experienced similar volatility. The yield on long-term
government bonds rose to about 7% from 6% at the beginning of the year. We
attribute most, if not all, of the accompanying sell-off in the bond market to
concerns over the rate of growth in the economy, its effect on the inflation
rate, and the action, if any, that the Federal Reserve would take. This evidence
has been quite inconclusive and, as a result, the market has been very unstable.
A FOCUSED, LONG-TERM APPROACH
Times like these, when the markets are searching for a clear direction, call for
patience. We believe that chasing after short-term market trends is a recipe for
trouble. Case in point: Investors who shifted money to bonds this year, based on
their strong performance during 1995, have suffered poor returns as a result.
Studies have shown(1) that 90% of an investment's return is determined by its
mix of different asset categories. The Time Horizon Funds are managed with the
goal of achieving the best mix of stocks and bonds, as is appropriate for each
Fund's stage in its investment time horizon. We will not invest in the most
popular market sectors in pursuit of short-term gains. Instead, we intend to
manage the asset mix appropriately and select individual securities within the
asset classes in a disciplined and consistent manner, regardless of short-term
swings in the financial markets. In particular, we will seek out investments
that we believe offer good value and the potential for long-term growth.
- ---------------
(1)Source: Brinson, Beebower & Hood, 1991.
6
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When it comes to individual stock selection, this strategy gives us the best of
both worlds:
First, we focus on companies that we believe can deliver strong earnings growth.
And second, we seek to buy these companies' stocks when they're relatively
cheap, as measured by price-to-earnings ratios and other guidelines.
SUITING INVESTMENTS TO YOUR GOALS
The Funds' combined assets as of June 30, 1996, totaled $74.1 million. During
the almost 10 months since the Funds' inception, we have built a diversified
investment portfolio for each Fund.
Each Fund's portfolio now includes diversified stock holdings, with the
percentage of assets allocated to stocks consistent with the current strategic
asset allocation outlined in the Funds' prospectus. In the last few months,
we've also achieved greater diversification in each Fund's fixed income
investments by adding some mortgage-backed securities and corporate bonds. We
plan to continue to add to these positions going forward.
It's important to note that our primary goal is not to outpace the financial
markets over the short term. Instead, we are convinced that most investors have
a long-term outlook; they put their money to work in stocks, bonds and mutual
funds for specific financial goals at a definite future date -- for example,
taking a family vacation, putting a child through college or funding a secure
retirement. Of course, no mutual fund can guarantee that an investor's goals
will be met.
We believe that the Time Horizon Funds offer an innovative approach to mutual
fund investing -- an approach based on the realities that investors must face
over time. The Time Horizon approach is a simple investment solution. You decide
when you need to reach your goals, then let us do the work of creating and
managing a portfolio according to that schedule.
Sincerely,
/s/ David R. Johnsen
David R. Johnsen
7
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TIME HORIZON PORTFOLIO 1
The assets of Portfolio 1 grew to $25.9 million from its inception on September
5, 1995, through the fiscal year-end on June 30, 1996. During this period, we
continued to implement the Fund's asset allocation strategy by investing
primarily in a combination of stocks and bonds that we feel is appropriate to
the Fund's investment time horizon, currently just under 10 years. For the
period ending on June 30, the Fund's A and B shares had total returns of 6.68%
and 6.09%, respectively (with adjustment for the maximum 4.50% sales charge on A
Shares and the maximum 5% contingent deferred sales charge on B Shares, the
total returns for the Fund's A Shares and B Shares were 1.91% and 1.09% for the
period, respectively).
At the end of June, market value of the Fund's portfolio was as follows: 34% in
equities, 64% in fixed-income securities and 2% in cash and cash equivalents.+
We reduced its holdings in Treasury bills during the period, increased its stake
in shares of mid-sized U.S. companies and added some foreign exposure as well.
Our equity investments currently consist of a mix of large-sized company stocks,
mid-sized company stocks and foreign shares.
SECTOR DIVERSIFICATION
AS A % OF EQUITY
HOLDINGS AS OF 6/30/96+
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<S> <C>
Transportation 1.3%
Basic Industry 7.0%
Energy 8.6%
Health Care 10.5%
Consumer Staples 10.9%
Capital Goods 9.8%
Technology 12.5%
Utilities 12.0%
Financial Services 13.8%
Consumer Cyclical 13.6%
</TABLE>
A DIVERSIFIED APPROACH
Rather than invest heavily in a few particular sectors of the stock market, we
invest in a broad range of industries. Our goal is to buy undervalued shares of
companies that we believe offer the potential for strong earnings growth. Some
holdings that performed well during the period include TJX Companies, Inc.
(0.26% of the portfolio as of June 30, 1996), which owns retailer T.J. Maxx, and
sports apparel giant Nike, Inc. (0.16%). Both companies delivered solid earnings
gains throughout the period.
The Fund continued to hold a significant stake in Treasury securities
(approximately 78% of the fixed-income portion of the portfolio). We also
purchased some mortgage-backed securities and corporate bonds to further
diversify our fixed-income holdings, which had an average maturity of about 4.3
years as of June 30, 1996. That relatively short average maturity can help
reduce the risk of loss if rising interest rates push long-term bond prices
lower.
Looking ahead, the Fund's exposure to stocks likely will remain fairly stable.
However, we currently plan to further reallocate our fixed-income holdings
during the coming months to increase our investment in mortgage-backed
securities and corporate bonds, which will be carefully selected for their
higher yield potential, with, in our opinion, only a modest increase in risk.
<TABLE>
<CAPTION>
- -----------------------------------------------------
TOP FIVE EQUITY HOLDINGS+ PERCENT OF
AS OF 6/30/96 PORTFOLIO
<S> <C>
- -----------------------------------------------------
1. General Electric Co. 0.60%
....................................................
2. PepsiCo Inc. 0.56%
....................................................
3. Philip Morris Cos. Inc. 0.48%
....................................................
4. Citicorp 0.45%
....................................................
5. Johnson & Johnson 0.42%
- -----------------------------------------------------
<FN>
+The composition of the Fund's portfolio is subject to change. Percentages
shown are percentages of portfolio value.
</TABLE>
8
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Regardless of market fluctuations in the months ahead, we will continue to
pursue the Fund's overriding mission: to help our loyal, long-term shareholders
meet their financial goals occurring around a target date of 2005. Our
investment strategy will continue to be guided by a commitment to disciplined,
diversified and patient investing that combines the pursuit of growth with an
increasing emphasis on capital preservation.
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MEASUREMENT PERIOD AGGREGATE BOND
(FISCAL YEAR COVERED) A SHARES B SHARES S&P 500 INDEX
<S> <C> <C> <C> <C>
9/5/95 9,553 9,500 10,000 10,000
9,572 9,520 10,420 10,097
9,610 9,570 10,389 10,229
9,781 9,739 10,836 10,382
12/31/95 9,866 9,819 11,046 10,528
10,038 9,989 11,427 10,597
10,028 9,969 11,528 10,413
3/31/96 10,019 9,959 11,640 10,341
10,047 9,979 11,818 10,283
10,124 10,059 12,109 10,262
6/30/96 10,191 10,109 12,158 10,400
</TABLE>
HOW PERFORMANCE COMPARES
The chart compares the Time Horizon
Portfolio 1 to the S&P 500, which is
an unmanaged index typically used as a
performance benchmark for equity
investments, and to the Lehman
Brothers Aggregate Bond Index, an unmanaged index often used as a benchmark for
fixed-income investments. Hypothetical investments in the S&P 500 and Lehman
Brothers Aggregate Bond Index do not reflect any sales charges, management fees,
transaction costs or other expenses that would be incurred if an investor were
to actually purchase individual securities or mutual funds, while the
performance of the Fund reflects all expenses, fees and the effect of the
maximum front-end or applicable contingent deferred sales charges.
SEE LETTER FROM THE MANAGER FOR FACTORS AFFECTING FUND PERFORMANCE.
Investment return and principal value are historical and will vary with market
conditions, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Return figures for Class A Shares include change in share price, reinvestment of
dividends and the effect of the maximum 4.50% sales charge. Return figures for
Class B Shares also include change in share price and reinvestment of dividends,
as well as the applicable contingent deferred sales charge. Without the effect
of the maximum front-end sales charge or applicable contingent deferred sales
charge, the Fund's total returns since inception for A Shares and B Shares were
6.68% and 6.09%, respectively.
S&P 500 is a registered trademark of Standard & Poor's Corporation.
Neither the S&P 500 Index, nor the Lehman Brothers Aggregate Bond Index may be
invested in directly.
<TABLE>
<CAPTION>
TOTAL RETURN
----------------------------------
A B
SHARES SHARES
<S> <C> <C>
Since inception
(9/5/95) 1.91% 1.09%
</TABLE>
9
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TIME HORIZON PORTFOLIO 2
The net assets of Portfolio 2 grew to $25.7 million from its inception on
September 5, 1995, through June 30, 1996. We implemented the Fund's long-term
strategy by investing those assets primarily in a combination of stocks and
bonds. For the period, the Fund's A and B shares had total returns of 7.48% and
6.88%, respectively (with adjustment for the maximum 4.50% sales charge on A
Shares and the maximum 5% contingent deferred sales charge on B Shares, the
total returns for the Fund's A Shares and B Shares were 2.67% and 1.88% for the
period, respectively).
We've designed the Fund's current asset allocation strategy to be "moderately
aggressive" in order to help investors plan for financial goals that will
require the use of their money around the year 2015. This long-term time horizon
of almost 20 years should allow shareholders to ride out short-term fluctuations
that may occur in the financial markets as the Fund pursues long-term growth.
A BALANCE OF STOCKS AND BONDS
Currently, our broad strategy is to maintain a fairly equal allocation between
stocks and bonds under most circumstances. At the end of the period, the market
value of the Fund's portfolio was as follows: 47% in equities, 48% in
fixed-income securities and 5% in cash and cash equivalents.+
We have allocated the Fund's stock investments primarily to shares of large and
medium-sized companies from a broad range of industries including consumer
services, retail and consumer staples. Holdings at the end of the period
included firms such as PepsiCo (0.60% of the portfolio as of June 30, 1996) and
Bellsouth Corp. (0.42%), which we believe offer strong growth prospects as well
as attractive valuations.
The Fund's fixed-income holdings were allocated as follows as of June 30, 1996:
<TABLE>
<CAPTION>
- --------------------------------------------
PERCENT OF
PORTFOLIO
TYPE OF SECURITY AS OF 6/30/96
<S> <C>
- --------------------------------------------
Treasury Notes 36%
............................................
Government Agency 7%
............................................
Corporate Bonds 5%
- --------------------------------------------
</TABLE>
The average maturity for the fixed-income portion of the Fund was relatively
low, at 4.3 years, which helps reduce the Fund's exposure to capital losses that
may occur when interest rates rise. As indicated in the preceding table, the
largest portion of the Fund's fixed-income holdings was made up of U.S. Treasury
notes, which carry
SECTOR DIVERSIFICATION
AS A % OF EQUITY
HOLDINGS AS OF 6/30/96+
<TABLE>
<S> <C>
Transportation 1.3
Basic Industry 7.3
Energy 8.6
Health Care 10.4
Consumer Staples 9.4
Capital Goods 10.1
Technology 13.0
Utilities 12.4
Financial Services 13.5
Consumer Cyclicals 14.0
</TABLE>
virtually no credit risk because they are backed by the U.S. Government.
However, the Fund's selective holdings of mortgage-backed securities and
corporate bonds offer higher yields with what we believe to be only modest
additional risk.
As the Fund's assets grow, we expect to increase our holdings in large domestic
companies and our exposure to foreign equities as well. Such changes will
reflect our ability to find bargains in specific markets that we believe are
consistent with the Fund's investment strategy given its stage in its time
horizon.
<TABLE>
- ----------------------------------------------
TOP FIVE EQUITY HOLDINGS+ PERCENT OF
AS OF 6/30/96 PORTFOLIO
- ----------------------------------------------
<S> <C>
1. General Electric Co. 0.62%
..............................................
2. PepsiCo Inc. 0.60%
..............................................
3. Comerica Inc. 0.59%
..............................................
4. Philip Morris Cos. Inc. 0.55%
..............................................
5. Citicorp 0.50%
- ----------------------------------------------
</TABLE>
+The composition of the Fund's portfolio is subject to change. Percentages shown
are percentages of
portfolio value.
10
<PAGE> 13
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MEASUREMENT PERIOD AGGREGATE BOND
(FISCAL YEAR COVERED) A SHARES B SHARES S&P 500 INDEX
<S> <C> <C> <C> <C>
9/5/95 9,553 9,500 10,000 10,000
9,572 9,520 10,420 10,097
9,619 9,570 10,389 10,229
9,838 9,789 10,836 10,382
12/31/95 9,932 9,878 11,046 10,528
10,133 10,078 11,427 10,597
10,105 10,048 11,528 10,413
3/31/96 10,085 10,028 11,640 10,341
10,114 10,048 11,818 10,283
10,229 10,158 12,109 10,262
6/30/96 10,267 10,188 12,158 10,400
</TABLE>
HOW PERFORMANCE COMPARES
The chart compares the Time Horizon
Portfolio 2 to the S&P 500, which is
an unmanaged index typically used as a
performance benchmark for equity
investments, and to the Lehman
Brothers Aggregate Bond Index, an unmanaged index often used as a benchmark for
fixed-income investments. Hypothetical investments in the S&P 500 and Lehman
Brothers Aggregate Bond Index do not reflect any sales charges, management fees,
transaction costs or other expenses that would be incurred if an investor were
to actually purchase individual securities or mutual funds, while the
performance of the Fund reflects all expenses, fees and the effect of the
maximum front-end or applicable contingent deferred sales charges.
SEE LETTER FROM THE MANAGER FOR FACTORS AFFECTING FUND PERFORMANCE.
Investment return and principal value are historical and will vary with market
conditions, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Return figures for Class A Shares include change in share price, reinvestment of
dividends, and the effect of the maximum 4.50% sales charge. Return figures for
Class B Shares also include change in share price and reinvestment of dividends,
as well as the applicable contingent deferred sales charge. Without the effect
of the maximum front-end sales charge or applicable contingent deferred sales
charge, the Fund's total returns since inception for A Shares and B Shares were
7.48% and 6.88%, respectively.
S&P 500 is a registered trademark of Standard & Poor's Corporation.
Neither the S&P 500 Index, nor the Lehman Brothers Aggregate Bond Index may be
invested in directly.
<TABLE>
<CAPTION>
TOTAL RETURN
----------------------------------
A B
SHARES SHARES
<S> <C> <C>
Since inception
(9/5/95) 2.67% 1.88%
</TABLE>
11
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TIME HORIZON PORTFOLIO 3
The net assets of Portfolio 3 grew to $22.5 million during the period from its
inception on September 5, 1995, through June 30, 1996. We invested those assets
mainly in a combination of stocks and bonds as we began to implement the Fund's
long-term strategy. For the period ended June 30, 1996, the Fund's A and B
shares had total returns of 9.46% and 8.98%, respectively (with adjustment for
the maximum 4.50% sales charge on A Shares and the maximum 5% contingent
deferred sales charge on B Shares, the total returns for the Fund's A Shares and
B Shares were 4.57% and 3.98%, respectively).
We currently have allocated approximately 70% of the Fund's assets to stocks and
30% to bonds during this early phase of its time horizon. This strategy reflects
the Fund's mission: to help shareholders invest toward long-term financial goals
that they anticipate will occur around the year 2025.
Thus, we intend to keep the Fund's portfolio nearly fully invested in the
financial markets. We believe the Fund's time horizon of close to 30 years will
allow shareholders to ride out short-term market corrections that may occur as
the Fund pursues long-term growth.
As of June 30, 1996, the market value of the Fund's portfolio was as follows:
63% in stocks, 27% in fixed income securities and 10% in cash or cash
equivalents.+ The Fund's stock investments were primarily focused on shares of
large and medium-sized U.S. companies, including General Electric (0.90% of the
portfolio) and PepsiCo (0.85%). These stocks, together with those of other
companies held by the Fund, represent a diverse group of industries, ranging
from consumer goods to transportation.
The Fund's fixed-income holdings included a mix of U.S. Treasury obligations,
mortgage-backed securities and corporate bonds. The average maturity of the
Fund's fixed-income holdings as of June 30, 1996, was a modest 4.8 years -- long
enough to generate competitive income and short enough to help maintain price
stability.
SECTOR DIVERSIFICATION
AS A % OF EQUITY
HOLDINGS AS OF 6/30/96+
<TABLE>
<S> <C>
TRANSPORTATION 1.4
BASIC INDUSTRY 7.3
ENERGY 8.7
HEALTH CARE 10.4
CONSUMER STAPLES 9.5
CAPITAL GOODS 10.3
TECHNOLOGY 12.8
FINANCIAL SERVICES 13.3
UTILITIES 12.3
CONSUMER CYCLICALS 14.0
</TABLE>
Looking ahead, we intend to increase our exposure to foreign markets, which will
further diversify the Fund's portfolio. In addition, we intend to allocate more
assets to mortgage-backed securities and corporate bonds. They offer
diversification benefits as well as potentially higher yields than Treasury
securities at what we believe to be only modest additional risk.
<TABLE>
<CAPTION>
- --------------------------------------------
TOP FIVE EQUITY HOLDINGS+ PERCENT OF
AS OF 6/30/96 PORTFOLIO
- --------------------------------------------
<S> <C>
1. General Electric Co. 0.90%
............................................
2. PepsiCo Inc. 0.85%
............................................
3. Comerica Inc. 0.78%
............................................
4. Philip Morris Cos. Inc. 0.74%
............................................
5. CitiCorp 0.69%
- --------------------------------------------
<FN>
+The composition of the Fund's portfolio is subject to change. Percentages
shown are percentages of portfolio value.
</TABLE>
12
<PAGE> 15
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MEASUREMENT PERIOD AGGREGATE BOND
(FISCAL YEAR COVERED) A SHARES B SHARES S&P 500 INDEX
<S> <C> <C> <C> <C>
9/5/95 9,553 9,500 10,000 10,000
9,581 9,530 10,420 10,097
9,619 9,580 10,389 10,229
9,914 9,879 10,836 10,382
12/31/95 9,969 9,938 11,046 10,528
10,227 10,198 11,427 10,597
10,199 10,168 11,528 10,413
3/31/96 10,218 10,168 11,640 10,341
10,256 10,208 11,818 10,283
10,438 10,388 12,109 10,262
6/30/96 10,457 10,398 12,158 10,400
</TABLE>
HOW PERFORMANCE COMPARES
The chart compares the Time Horizon
Portfolio 3 to the S&P 500, which is
an unmanaged index typically used as a
performance benchmark for equity
investments, and to the Lehman
Brothers Aggregate Bond Index, an unmanaged index often used as a benchmark for
fixed-income investments. Hypothetical investments in the S&P 500 and Lehman
Brothers Aggregate Bond Index do not reflect any sales charges, management fees,
transaction costs or other expenses that would be incurred if an investor were
to actually purchase individual securities or mutual funds, while the
performance of the Fund reflects all expenses, fees and the effect of the
maximum front-end or applicable contingent deferred sales charges.
SEE LETTER FROM THE MANAGER FOR FACTORS AFFECTING FUND PERFORMANCE.
Investment return and principal value are historical and will vary with market
conditions, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Return figures for Class A Shares include change in share price, reinvestment of
dividends and the effect of the maximum 4.50% sales charge. Return figures for
Class B Shares also include change in share price and reinvestment of dividends
as well as the applicable contingent deferred sales charge. Without the effect
of the maximum front-end sales charge or applicable contingent deferred sales
charge, the Fund's total returns since inception for A Shares and B Shares were
9.46% and 8.98%, respectively.
S&P 500 is a registered trademark of Standard & Poor's Corporation.
Neither the S&P 500 Index, nor the Lehman Brothers Aggregate Bond Index may be
invested in directly.
<TABLE>
<CAPTION>
TOTAL RETURN
----------------------------------
A B
SHARES SHARES
<S> <C> <C>
Since inception
(9/5/95) 4.57% 3.98%
</TABLE>
13
<PAGE> 16
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost $25,557,718; $26,153,772;
and $23,698,505)...................................... $25,750,067 $26,312,893 $24,007,630
Cash.................................................... 198 962 626
Interest receivable..................................... 208,285 209,937 122,935
Receivable from Investment Adviser...................... 15,864 18,046 19,942
Receivable for capital shares issued.................... 354,768 149,684 227,167
Receivable for investments sold......................... 546,798 548,579 213,051
Unamortized organization costs.......................... 21,285 20,842 18,985
Other assets............................................ 700 -- --
----------- ----------- -----------
Total Assets............................................. 26,897,965 27,260,943 24,610,336
----------- ----------- -----------
LIABILITIES:
Payable for investments purchased....................... 931,498 1,455,152 2,014,730
Payable for capital shares redeemed..................... 45,084 -- 62,333
Accrued expenses and other payables:
Management fees....................................... 410 409 355
Shareholder Services fees (Class B Shares)............ 594 580 516
12b-1 fees (Class B Shares)........................... 11,137 10,882 9,681
Legal fees............................................ 3,191 2,534 2,437
Audit fees............................................ 8,617 8,550 8,540
Printing fees......................................... 26,920 25,546 20,948
Other................................................. 17,600 18,726 16,551
----------- ----------- -----------
Total Liabilities........................................ 1,045,051 1,522,379 2,136,091
----------- ----------- -----------
NET ASSETS:
Capital................................................. 25,223,599 25,151,567 21,807,711
Accumulated undistributed net investment income......... 329,495 280,503 197,597
Net unrealized appreciation on investments.............. 192,349 159,121 309,125
Accumulated undistributed net realized gains on
investment transactions............................... 107,471 147,373 159,812
----------- ----------- -----------
Net Assets............................................ $25,852,914 $25,738,564 $22,474,245
============= ============= =============
Net Assets
Class A................................................. $ 7,171,810 $ 7,388,788 $ 6,033,383
Class B................................................. 18,681,104 18,349,776 16,440,862
----------- ----------- -----------
Total.................................................... $25,852,914 $25,738,564 $22,474,245
============= ============= =============
Outstanding units of beneficial interest (shares)
Class A................................................. 673,698 688,591 551,552
Class B................................................. 1,761,898 1,717,473 1,508,791
----------- ----------- -----------
Total.................................................... 2,435,596 2,406,064 2,060,343
============= ============= =============
Net asset value
Class A -- redemption price per share................... $10.65 $10.73 $10.94
Class B -- offering price per share*.................... $10.60 $10.68 $10.90
============= ============= =============
Maximum Sales Charge (Class A)........................... 4.50% 4.50% 4.50%
============= ============= =============
Maximum Offering Price
(100%/(100% - Maximum Sales Charge) of net asset value
adjusted to nearest cent) per share (Class A)............ $11.15 $11.24 $11.46
============= ============= =============
<FN>
- ---------------
* Redemption price per share is equal to the net asset value per share less any
applicable redemption fee.
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
------------ ------------ ------------
SEPTEMBER 5, SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO 1995 TO
JUNE 30, JUNE 30, JUNE 30,
1996(A) 1996(A) 1996(A)
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income................... $ 434,417 $ 353,330 $ 231,739
Dividend income................... 61,857 71,084 81,319
------------ ------------ ------------
Total Income.................... 496,274(b) 424,414(b) 313,058(b)
------------ ------------ ------------
EXPENSES:
Management fees................... 69,110 62,082 50,968
12b-1 fees (Class B Shares)....... 60,681 51,195 43,529
Shareholder Services fees (Class A
and Class B Shares)............. 27,861 25,030 20,548
Accounting fees................... 12,500 12,500 11,980
Custodian fees.................... 19,673 19,583 19,597
Legal fees........................ 3,191 3,034 2,937
Audit fees........................ 10,002 9,965 9,471
Organization costs................ 2,763 2,763 2,673
Trustees' fees.................... 15,279 13,616 9,061
Transfer agent fees............... 74,023 77,501 76,567
Registration and filing fees...... 56,859 56,557 45,523
Printing costs.................... 33,328 29,455 23,522
Other............................. 181 136 115
------------ ------------ ------------
Total Expenses before waivers
and reimbursements............ 385,451 363,417 316,491
Expense waivers and
reimbursements................ (266,611) (257,372) (226,862)
------------ ------------ ------------
Total Expenses.................. 118,840 106,045 89,629
------------ ------------ ------------
Net investment income............... 377,434 318,369 223,429
------------ ------------ ------------
REALIZED/UNREALIZED GAINS ON
INVESTMENTS:
Net realized gains on investment
transactions.................... 107,472 147,373 159,812
Net change in unrealized
appreciation on investments..... 192,349 159,121 309,125
------------ ------------ ------------
Net realized/unrealized gains on
investments....................... 299,821 306,494 468,937
------------ ------------ ------------
Change in net assets resulting from
operations........................ $ 677,255 $ 624,863 $ 692,366
============ ============ ============
<FN>
- ---------------
(a) Period from commencement of operations.
(b) Includes income earned during the period from July 28, 1995 (initial seed
date) through September 4, 1995 (initial sale of shares to public).
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
------------- ------------- -------------
SEPTEMBER 5, SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO 1995 TO
JUNE 30, JUNE 30, JUNE 30,
1996(A) 1996(A) 1996(A)
------------- ------------- -------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.......... $ 377,434(b) $ 318,369(b) $ 223,429(b)
Net realized gains on
investment transactions...... 107,472 147,373 159,812
Net change in unrealized
appreciation on
investments.................. 192,349 159,121 309,125
------------- ------------- -------------
Change in net assets resulting
from operations................ 677,255 624,863 692,366
------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income
Class A Shares................. (15,257) (15,619) (9,321)
Class B Shares................. (32,683) (22,247) (16,511)
------------- ------------- -------------
Change in net assets from
shareholder distributions...... (47,940) (37,866) (25,832)
------------- ------------- -------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued.... 27,464,750 27,032,533 23,645,035
Dividends reinvested........... 38,330 32,856 21,147
Cost of shares redeemed........ (2,279,481) (1,913,822) (1,858,471)
------------- ------------- -------------
Change in net assets from
capital transactions........... 25,223,599 25,151,567 21,807,711
------------- ------------- -------------
Change in net assets............ 25,852,914 25,738,564 22,474,245
NET ASSETS:
Beginning of period............ -- -- --
------------- ------------- -------------
End of period.................. $25,852,914 $25,738,564 $22,474,245
============= ============= =============
SHARE TRANSACTIONS:
Sold........................... 2,648,753 2,583,978 2,232,127
Reinvested..................... 3,725 3,171 2,030
Redeemed....................... (216,882) (181,085) (173,814)
------------- ------------- -------------
Change in shares................ 2,435,596 2,406,064 2,060,343
============= ============= =============
<FN>
- ---------------
(a) Period from commencement of operations.
(b) Includes income earned during the period from July 28, 1995 (initial seed
date) through September 4, 1995 (initial sale of shares to public).
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 19
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS -- 30.7%
ADVERTISING -- 0.2%
Omnicom Group........................................................ 900 $ 41,850
-----------
AIR TRANSPORTATION -- 0.1%
Alaska Airgroup, Inc.(b)............................................. 600 16,425
AMR Corp.(b)......................................................... 200 18,200
-----------
34,625
-----------
AUTOMOBILES & TRUCKS -- 0.4%
Chrysler Corp. ...................................................... 1,000 62,000
Ford Motor Co. ...................................................... 1,400 45,325
-----------
107,325
-----------
AUTO PARTS -- 0.0%
Standard Products Co. ............................................... 500 11,625
-----------
BANKS -- 2.4%
Bank of Boston....................................................... 1,500 74,250
Citicorp............................................................. 1,400 115,675
Comerica, Inc. ...................................................... 2,200 98,175
First Tennessee National Corp. ...................................... 800 24,500
First Union Corp. (N.C.)............................................. 1,200 73,050
Firstar Corp. ....................................................... 700 32,288
J.P. Morgan & Co. ................................................... 900 76,163
NationsBank Corp. ................................................... 800 66,100
Northern Trust Corp. ................................................ 300 17,325
Regions Financial Corp. ............................................. 700 32,725
State Street Boston Corp. ........................................... 400 20,400
-----------
630,651
-----------
BEVERAGES -- 0.9%
Coca-Cola Co. ....................................................... 1,800 87,975
PepsiCo, Inc. ....................................................... 4,100 145,037
-----------
233,012
-----------
BUSINESS EQUIPMENT & SERVICES -- 0.5%
Equifax, Inc. ....................................................... 1,000 26,250
Harris Corp. ........................................................ 300 18,300
Kelly Services, Inc., Class A........................................ 600 17,550
Xerox Corp. ......................................................... 700 37,450
Reynolds & Reynolds, Class A......................................... 700 37,275
-----------
136,825
-----------
CHEMICALS - PETRO & INORGANIC -- 0.5%
Monsanto Corp. ...................................................... 2,600 84,500
Praxair, Inc. ....................................................... 1,100 46,475
-----------
130,975
-----------
</TABLE>
- ---------------
Continued
17
<PAGE> 20
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
CHEMICALS - SPECIALTY -- 0.2%
Goodrich (B.F.) Co. ................................................. 400 $ 14,950
Lubrizol Corp. ...................................................... 800 24,300
Morton International, Inc. .......................................... 600 22,350
-----------
61,600
-----------
COMPUTER - HARDWARE -- 0.7%
Adaptec, Inc.(b)..................................................... 700 33,162
Cabletron Systems(b)................................................. 200 13,725
Cisco Systems, Inc.(b)............................................... 1,200 67,950
Gateway 2000, Inc.(b)................................................ 900 30,600
Komag, Inc.(b)....................................................... 1,200 31,650
-----------
177,087
-----------
COMPUTERS - MAIN & MINI -- 0.5%
Hewlett Packard...................................................... 900 89,662
Sun Microsystems, Inc.(b)............................................ 600 35,325
-----------
124,987
-----------
COMPUTER SERVICES -- 0.1%
Ceridian Corp.(b).................................................... 400 20,200
-----------
COMPUTER SOFTWARE -- 1.3%
BMC Software, Inc.(b)................................................ 400 23,900
Cadence Design Systems, Inc.(b)...................................... 800 27,000
Computer Associates, Inc. ........................................... 500 35,625
Compuware Corp.(b)................................................... 600 23,700
Microsoft Corp.(b)................................................... 900 108,112
Oracle Corp.(b)...................................................... 1,600 63,100
Parametric Technology Corp.(b)....................................... 1,000 43,375
-----------
324,812
-----------
CONTAINERS -- 0.4%
Bemis Co. ........................................................... 700 24,500
Crown Cork & Seal Co., Inc. ......................................... 1,000 45,000
Sonoco Products Co. ................................................. 800 22,700
-----------
92,200
-----------
COSMETICS & TOILETRIES -- 0.3%
Avon Products, Inc. ................................................. 1,000 45,125
Gillette Co. ........................................................ 500 31,187
-----------
76,312
-----------
DEFENSE -- 0.8%
General Dynamics Corp. .............................................. 500 31,000
Lockheed Martin Corp. ............................................... 700 58,800
Rockwell International Corp. ........................................ 900 51,525
United Technologies Corp. ........................................... 600 69,000
-----------
210,325
-----------
DIVERSIFIED PRODUCTS -- 0.7%
E.I. du Pont de Nemours.............................................. 1,100 87,037
Olin Corp. .......................................................... 400 35,700
Textron, Inc......................................................... 500 39,937
Whitman Corp. ....................................................... 800 19,300
-----------
181,974
-----------
</TABLE>
- ---------------
Continued
18
<PAGE> 21
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
ELECTRICAL EQUIPMENT -- 0.9%
General Electric..................................................... 1,800 $ 155,700
Honeywell, Inc....................................................... 900 49,050
Parker Hannifin Corp. ............................................... 700 29,663
-----------
234,413
-----------
ELECTRONIC COMPONENTS -- 1.0%
Atmel Corp.(b)....................................................... 2,300 69,288
Intel Corp. ......................................................... 1,300 95,469
International Rectifier Corp.(b)..................................... 1,600 25,800
Lattice Semiconductor Corp.(b)....................................... 600 14,475
Maxim Integrated Products(b)......................................... 500 13,657
Sundstrand Corp...................................................... 800 29,300
-----------
247,989
-----------
ENTERTAINMENT -- 0.4%
King World Productions, Inc.(b)...................................... 900 32,738
The Walt Disney Co. ................................................. 1,219 76,645
-----------
109,383
-----------
FINANCIAL SERVICES -- 1.0%
Bear Stearns Companies, Inc. ........................................ 1,900 44,887
Dean Witter Discover & Co. .......................................... 1,000 57,250
Edwards (A.G.), Inc. ................................................ 1,000 27,125
Merrill Lynch & Co. ................................................. 900 58,612
SouthTrust Corp. .................................................... 1,000 28,125
SunAmerica, Inc. .................................................... 600 33,900
-----------
249,899
-----------
FOOD & RELATED -- 0.7%
Campbell Soup Co. ................................................... 800 56,400
ConAgra.............................................................. 1,200 54,450
IBP, Inc. ........................................................... 600 16,575
Interstate Bakeries.................................................. 500 13,375
Sara Lee Corp. ...................................................... 1,100 35,612
-----------
176,412
-----------
FURNITURE & FURNISHINGS -- 0.1%
Leggett & Platt, Inc. ............................................... 1,200 33,300
-----------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.4%
HFS,Inc.(b).......................................................... 400 28,000
ITT Corp.(b)......................................................... 400 26,500
Marriott International, Inc. ........................................ 900 48,375
-----------
102,875
-----------
HOUSEHOLD - GENERAL PRODUCTS -- 0.5%
Clorox Co. .......................................................... 500 44,312
First Brands Corp. .................................................. 700 18,900
Lancaster Colony Corp. .............................................. 500 18,688
Newell Co. .......................................................... 1,400 42,875
-----------
124,775
-----------
HOUSING -- 0.1%
PHH Corp............................................................. 300 17,100
-----------
</TABLE>
- ---------------
Continued
19
<PAGE> 22
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
INSURANCE - MULTILINE -- 0.8%
Allstate Insurance................................................... 1,200 $ 54,750
ACE Ltd. ............................................................ 400 18,800
CIGNA Corp. ......................................................... 400 47,150
EXEL Ltd. ........................................................... 200 14,100
Providian Corp. ..................................................... 1,100 47,162
SAFECO Corp. ........................................................ 800 28,300
-----------
210,262
-----------
LEISURE TIME INDUSTRY -- 0.4%
Callaway Golf Co. ................................................... 1,000 33,250
Harley-Davidson, Inc. ............................................... 500 20,562
Mirage Resorts, Inc.(b).............................................. 700 37,800
-----------
91,612
-----------
MACHINE - DIVERSIFIED -- 0.1%
Duriron Co. ......................................................... 600 14,400
Ingersoll-Rand Co. .................................................. 500 21,875
-----------
36,275
-----------
MACHINERY & EQUIPMENT -- 0.2%
Briggs & Stratton.................................................... 600 24,675
Novellus Systems, Inc.(b)............................................ 400 14,400
-----------
39,075
-----------
MANUFACTURED HOUSING -- 0.2%
Clayton Homes, Inc. ................................................. 2,300 46,000
-----------
MANUFACTURING -- 0.2%
Harsco Corp. ........................................................ 300 20,175
Measurex Corp. ...................................................... 700 20,475
-----------
40,650
-----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.2%
Beckman Instruments, Inc............................................. 500 19,000
Becton Dickinson & Co. .............................................. 200 16,050
DENTSPLY International, Inc. ........................................ 300 12,750
-----------
47,800
-----------
MEDICAL - HOSPITAL MANAGEMENT & SERVICES -- 0.6%
Columbia HCA Healthcare Corp. ....................................... 400 21,350
HEALTHSOUTH Corp.(b)................................................. 900 32,400
Healthcare Compare Corp.(b).......................................... 900 43,875
Health Care & Retirement Corp.(b).................................... 750 17,812
U.S. Healthcare, Inc. ............................................... 600 33,000
-----------
148,437
-----------
METAL FABRICATION -- 0.1%
Danaher Corp. ....................................................... 500 21,750
-----------
METALS - DIVERSIFIED -- 0.2%
Phelps Dodge Corp. .................................................. 600 37,425
Trinity Industries................................................... 600 20,400
-----------
57,825
-----------
</TABLE>
- ---------------
Continued
20
<PAGE> 23
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
OIL & GAS -- 2.5%
Atlantic Richfield Co. .............................................. 400 $ 47,400
Consolidated Natural Gas Co. ........................................ 400 20,900
Exxon Corp. ......................................................... 1,100 95,562
Kerr-McGee Corp. .................................................... 400 24,350
Mobil Corp. ......................................................... 800 89,700
Noble Drilling Corp.(b).............................................. 1,000 13,875
Parker & Parsley Petro Co. .......................................... 1,000 27,750
Phillips Petroleum Co. .............................................. 1,600 67,000
Reading & Bates Corp.(b)............................................. 900 19,913
Royal Dutch Petroleum................................................ 400 61,500
Smith International, Inc.(b)......................................... 1,100 33,137
Texaco, Inc. ........................................................ 600 50,325
Tidewater, Inc. ..................................................... 1,400 61,425
Valero Energy Corp. ................................................. 600 15,000
Williams Companies, Inc. ............................................ 600 29,700
-----------
657,537
-----------
PAPER & PAPER PRODUCTS -- 0.1%
Temple-Inland, Inc. ................................................. 700 32,725
-----------
PHARMACEUTICALS -- 2.4%
Abbott Laboratories.................................................. 1,200 52,200
Bergen Brunswig Corp., Class A....................................... 900 24,975
Bristol-Myers Squibb Co. ............................................ 1,000 90,000
Cardinal Health, Inc. ............................................... 500 36,063
Elan Corp. PLC, ADR(b)............................................... 400 22,850
Johnson & Johnson.................................................... 2,200 108,900
Mallinckrodt Group, Inc.............................................. 700 27,213
Merck & Co, Inc. .................................................... 1,300 84,013
Pfizer, Inc. ........................................................ 1,200 85,650
Schering-Plough...................................................... 1,300 81,575
Watson Pharmaceutical, Inc.(b)....................................... 500 18,938
-----------
632,377
-----------
PUBLISHING -- 0.4%
New York Times Co., Class A.......................................... 1,200 39,150
Times Mirror Co., Class A............................................ 600 26,100
Washington Post, Class B............................................. 100 32,400
-----------
97,650
-----------
RAILROAD -- 0.3%
Illinois Central Corp. .............................................. 400 11,350
Norfolk Southern..................................................... 700 59,325
-----------
70,675
-----------
RESTAURANTS -- 0.1%
Outback Steakhouse, Inc.(b).......................................... 500 17,242
-----------
RETAIL - APPAREL -- 1.1%
Claire's Stores, Inc. ............................................... 800 22,100
Dollar General....................................................... 1,000 29,250
The Gap, Inc. ....................................................... 2,300 73,888
Liz Claiborne, Inc. ................................................. 500 17,313
Nike, Inc., Class B.................................................. 400 41,100
Ross Stores, Inc. ................................................... 900 31,275
TJX Companies, Inc. ................................................. 2,000 67,500
-----------
282,426
-----------
</TABLE>
- ---------------
Continued
21
<PAGE> 24
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
RETAIL - FOOD STORES -- 0.4%
American Stores Co. ................................................. 700 $ 28,875
Safeway, Inc.(b)..................................................... 1,600 52,800
Vons Companies, Inc.(b).............................................. 500 18,687
-----------
100,362
-----------
RETAIL - GENERAL MERCHANDISE -- 0.3%
Dayton-Hudson Corp. ................................................. 300 30,938
Sears Roebuck & Co. ................................................. 1,200 58,350
-----------
89,288
-----------
RETAIL - SPECIALTY STORES -- 0.1%
Staples, Inc.(b)..................................................... 1,700 33,150
-----------
STEEL -- 0.2%
Allegheny Ludlum Corp. .............................................. 1,300 24,538
Nucor Corp. ......................................................... 700 35,438
-----------
59,976
-----------
TELECOMMUNICATIONS - EQUIPMENT -- 0.2%
ADC Telecommunications, Inc.(b)...................................... 500 22,500
U.S. Robotics Corp.(b)............................................... 400 34,200
-----------
56,700
-----------
TIRES & RUBBER PRODUCTS -- 0.1%
Goodyear Tire Co. ................................................... 600 28,950
-----------
TOBACCO -- 0.5%
Philip Morris Co., Inc. ............................................. 1,200 124,800
Schweitzer-Mauduit International, Inc. .............................. 30 844
Universal Corp. ..................................................... 400 10,600
-----------
136,244
-----------
TOYS -- 0.1%
Hasbro, Inc. ........................................................ 700 25,025
-----------
UTILITIES - ELECTRIC -- 1.7%
Boston Edison Co. ................................................... 1,300 33,150
CMS Energy Corp. .................................................... 1,300 40,137
DQE, Inc. ........................................................... 1,500 41,250
Edison International................................................. 1,700 29,963
Florida Progress Corp. .............................................. 1,300 45,175
FPL Group, Inc. ..................................................... 1,500 69,000
General Public Utilities............................................. 2,500 88,125
Illinova Corp. ...................................................... 1,300 37,375
NIPSCO Industries.................................................... 900 36,225
Northern States Power................................................ 600 29,625
-----------
450,025
-----------
UTILITIES - GAS & PIPELINE -- 0.1%
NICOR, Inc. ......................................................... 700 19,862
-----------
</TABLE>
- ---------------
Continued
22
<PAGE> 25
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
UTILITIES - TELEPHONE -- 2.0%
Ameritech Corp. ..................................................... 1,200 $ 71,250
AT&T Corp. .......................................................... 1,700 105,400
BellSouth Corp. ..................................................... 2,300 97,462
Frontier Corp. ...................................................... 1,500 45,938
Southern New England Telecommunications.............................. 1,100 46,200
Southwestern Bell Corp. ............................................. 1,600 78,800
Sprint Corp. ........................................................ 1,500 63,000
-----------
508,050
-----------
Total Common Stocks................................................... 7,930,481
-----------
CORPORATE BONDS -- 5.4%
FINANCIAL SERVICES -- 2.3%
AT&T Capital Corp., 6.14%, 10/19/98.................................. $ 200,000 198,250
General Electric Capital Corp.,
8.10%, 1/26/99..................................................... 200,000 207,500
Household Netherlands BV,
6.13%, 3/1/03, LOC: Household International........................ 200,000 190,250
-----------
596,000
-----------
INDUSTRIAL GOODS & SERVICES -- 2.3%
Heinz Co., 6.88%, 1/15/03............................................ 200,000 199,000
Kellogg Co., 5.90%, 7/15/97.......................................... 400,000 398,500
-----------
597,500
-----------
ELECTRIC UTILITY -- 0.8%
Delmarva Power & Light, 6.40%, 7/1/03................................ 200,000 191,750
-----------
Total Corporate Bonds................................................. 1,385,250
-----------
U.S. TREASURY OBLIGATIONS -- 51.2%
U.S. TREASURY BILLS -- 2.0%
8/1/96............................................................... 38,000 37,833
8/22/96.............................................................. 487,000 483,352
-----------
Total U.S. Treasury Bills............................................. 521,185
-----------
U.S. TREASURY NOTES -- 49.2%
6.13%, 5/31/97....................................................... 2,590,000 2,598,133
5.38%, 5/31/98....................................................... 2,475,000 2,442,379
6.75%, 5/31/99....................................................... 2,425,000 2,452,815
6.25%, 8/31/00....................................................... 3,457,000 3,432,040
6.38%, 8/15/02....................................................... 1,150,000 1,140,271
6.50%, 5/15/05....................................................... 675,000 666,016
-----------
Total U.S. Treasury Notes............................................. 12,731,654
-----------
Total U.S. Treasury Obligations....................................... 13,252,839
-----------
</TABLE>
- ---------------
Continued
23
<PAGE> 26
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 8.8%
Federal Home Loan Mortgage Corp.:
5.50%, 10/1/98, Pool #G50236....................................... $ 542,802 $ 526,068
Federal National Mortgage Assoc.:
6.50%, 1/1/06, Pool #81690......................................... 540,451 521,881
7.50%, 5/1/07, Pool #124341........................................ 481,195 483,308
5.50%, 12/25/14, Series 1993-155, Class PD......................... 750,000 736,080
-----------
Total U.S. Government Agencies........................................ 2,267,337
-----------
INVESTMENT COMPANIES -- 3.5%
T. Rowe Price Foreign Equity Fund.................................... 58,600 914,160
-----------
Total Investment Companies............................................ 914,160
-----------
TOTAL (COST -- $25,557,718)(A)........................................ $25,750,067
Other Assets in Excess of Liabilities................................. 102,847
-----------
NET ASSETS -- 100.0%.................................................. $25,852,914
===========
<FN>
- ---------------
Percentages indicated are based on net assets of $25,852,914.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
approximately $16,000. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
</TABLE>
<TABLE>
<S> <C>
Unrealized appreciation....................................... $ 641,775
Unrealized depreciation....................................... (465,106)
----------
Net unrealized appreciation................................... $ 176,669
===========
<FN>
(b) Represents non-income producing securities.
ADR -- American Depositary Receipt
LOC -- Letter of Credit
</TABLE>
See Notes to Financial Statements.
24
<PAGE> 27
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS -- 45.1%
ADVERTISING -- 0.4%
Omnicom Group........................................................ 2,000 $ 93,000
-----------
AIR TRANSPORTATION -- 0.2%
Alaska Airgroup, Inc.(b)............................................. 1,400 38,325
AMR Corp.(b)......................................................... 200 18,200
-----------
56,525
-----------
AUTOMOBILES & TRUCKS -- 0.5%
Chrysler Corp. ...................................................... 1,200 74,400
Ford Motor Co. ...................................................... 1,400 45,325
-----------
119,725
-----------
AUTO PARTS -- 0.1%
Standard Products Co. ............................................... 1,100 25,575
-----------
BANKS -- 3.4%
Bank of Boston....................................................... 1,600 79,200
Citicorp............................................................. 1,600 132,200
Comerica, Inc. ...................................................... 3,500 156,187
First Tennessee National Corp. ...................................... 1,700 52,062
First Union Corp. (N.C.)............................................. 1,300 79,137
Firstar Corp. ....................................................... 1,600 73,800
J.P. Morgan & Co. ................................................... 900 76,162
NationsBank Corp. ................................................... 900 74,363
Northern Trust Corp. ................................................ 800 46,200
Regions Financial Corp. ............................................. 1,500 70,125
State Street Boston Corp. ........................................... 800 40,800
-----------
880,236
-----------
BEVERAGES -- 1.0%
Coca-Cola Co. ....................................................... 2,000 97,750
PepsiCo, Inc. ....................................................... 4,500 159,187
-----------
256,937
-----------
BUSINESS EQUIPMENT & SERVICES -- 1.0%
Equifax, Inc. ....................................................... 2,300 60,375
Harris Corp. ........................................................ 400 24,400
Kelly Services, Inc., Class A........................................ 1,400 40,950
Reynolds & Reynolds, Class A......................................... 1,500 79,875
Xerox Corp. ......................................................... 800 42,800
-----------
248,400
-----------
CHEMICALS - PETRO & INORGANIC -- 0.7%
Monsanto Corp. ...................................................... 2,800 91,000
Praxair, Inc. ....................................................... 2,400 101,400
-----------
192,400
-----------
</TABLE>
- ---------------
Continued
25
<PAGE> 28
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
CHEMICALS - SPECIALTY -- 0.4%
Goodrich (B.F.) Co. ................................................. 900 $ 33,638
Lubrizol Corp. ...................................................... 1,700 51,638
Morton International, Inc. .......................................... 700 26,075
-----------
111,351
-----------
COMPUTER HARDWARE -- 1.0%
Adaptec, Inc.(b)..................................................... 700 33,162
Cabletron Systems(b)................................................. 300 20,588
Cisco Systems, Inc.(b)............................................... 1,300 73,613
Gateway 2000, Inc.(b)................................................ 2,000 68,000
Komag, Inc.(b)....................................................... 2,600 68,575
-----------
263,938
-----------
COMPUTERS - MAIN & MINI -- 0.5%
Hewlett Packard...................................................... 1,000 99,625
Sun Microsystems, Inc.(b)............................................ 600 35,325
-----------
134,950
-----------
COMPUTER SERVICES -- 0.2%
Ceridian Corp.(b).................................................... 1,000 50,500
-----------
COMPUTER SOFTWARE -- 1.9%
BMC Software, Inc.(b)................................................ 900 53,775
Cadence Design Systems, Inc.(b)...................................... 1,900 64,125
Computer Associates, Inc. ........................................... 400 28,500
Compuware Corp.(b)................................................... 1,400 55,300
Microsoft Corp.(b)................................................... 1,000 120,125
Oracle Corp.(b)...................................................... 1,800 70,988
Parametric Technology Corp.(b)....................................... 2,400 104,100
-----------
496,913
-----------
CONTAINERS -- 0.6%
Bemis Co. ........................................................... 1,600 56,000
Crown Cork & Seal Co., Inc. ......................................... 800 36,000
Sonoco Products Co. ................................................. 1,800 51,075
-----------
143,075
-----------
COSMETICS & TOILETRIES -- 0.3%
Avon Products, Inc. ................................................. 1,100 49,637
Gillette Co. ........................................................ 500 31,187
-----------
80,824
-----------
DEFENSE -- 1.0%
General Dynamics Corp. .............................................. 600 37,200
Lockheed Martin Corp. ............................................... 800 67,200
Rockwell International Corp. ........................................ 1,100 62,975
United Technologies Corp. ........................................... 700 80,500
-----------
247,875
-----------
DIVERSIFIED PRODUCTS -- 1.1%
E.I. du Pont de Nemours.............................................. 1,300 102,862
Olin Corp. .......................................................... 900 80,325
Textron, Inc. ....................................................... 600 47,925
Whitman Corp. ....................................................... 1,700 41,013
-----------
272,125
-----------
</TABLE>
- ---------------
Continued
26
<PAGE> 29
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
ELECTRICAL EQUIPMENT -- 1.0%
General Electric..................................................... 1,900 $ 164,350
Honeywell, Inc. ..................................................... 1,000 54,500
Parker Hannifin Corp. ............................................... 700 29,662
-----------
248,512
-----------
ELECTRONIC COMPONENTS -- 1.6%
Atmel Corp.(b)....................................................... 3,800 114,475
Intel Corp. ......................................................... 1,500 110,157
International Rectifier Corp.(b)..................................... 3,500 56,438
Lattice Semiconductor Corp.(b)....................................... 1,400 33,775
Maxim Integrated Products(b)......................................... 1,100 30,044
Sundstrand Corp. .................................................... 1,800 65,925
-----------
410,814
-----------
ENTERTAINMENT -- 0.5%
King World Productions, Inc.(b)...................................... 1,200 43,650
The Walt Disney Co. ................................................. 1,419 89,219
-----------
132,869
-----------
FINANCIAL SERVICES -- 1.6%
Bear Stearns Companies, Inc. ........................................ 4,200 99,225
Dean Witter Discover & Co. .......................................... 1,100 62,975
Edwards (A.G.), Inc. ................................................ 2,200 59,675
Merrill Lynch & Co. ................................................. 1,000 65,125
SouthTrust Corp. .................................................... 2,200 61,875
SunAmerica, Inc. .................................................... 1,300 73,450
-----------
422,325
-----------
FOOD & RELATED -- 0.9%
Campbell Soup Co. ................................................... 900 63,450
ConAgra.............................................................. 1,400 63,525
IBP, Inc. ........................................................... 1,200 33,150
Interstate Bakeries.................................................. 1,100 29,425
Sara Lee Corp. ...................................................... 1,200 38,850
-----------
228,400
-----------
FURNITURE & FURNISHINGS -- 0.3%
Leggett & Platt, Inc. ............................................... 2,700 74,925
-----------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.6%
HFS, Inc.(b)......................................................... 1,000 70,000
ITT Corp.(b)......................................................... 400 26,500
Marriott International, Inc.......................................... 1,000 53,750
-----------
150,250
-----------
HOUSEHOLD - GENERAL PRODUCTS -- 0.7%
Clorox Co. .......................................................... 600 53,175
First Brands Corp. .................................................. 1,400 37,800
Lancaster Colony Corp. .............................................. 1,000 37,375
Newell Co. .......................................................... 1,600 49,000
-----------
177,350
-----------
HOUSING -- 0.1%
PHH Corp. ........................................................... 700 39,900
-----------
</TABLE>
- ---------------
Continued
27
<PAGE> 30
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
INSURANCE -- 1.0%
Allstate Insurance................................................... 1,300 $ 59,312
ACE Ltd. ............................................................ 900 42,300
CIGNA Corp. ......................................................... 400 47,150
EXEL Ltd. ........................................................... 500 35,250
Providian Corp. ..................................................... 1,100 47,163
SAFECO Corp. ........................................................ 900 31,837
-----------
263,012
-----------
LEISURE TIME INDUSTRY -- 0.8%
Callaway Golf Co. ................................................... 2,200 73,150
Harley-Davidson, Inc. ............................................... 1,200 49,350
Mirage Resorts, Inc.(b).............................................. 1,600 86,400
-----------
208,900
-----------
MACHINE - DIVERSIFIED -- 0.3%
Briggs & Stratton.................................................... 1,200 49,350
Duriron Co. ......................................................... 1,200 28,800
-----------
78,150
-----------
MACHINERY & EQUIPMENT -- 0.2%
Ingersoll-Rand Co. .................................................. 500 21,875
Novellus Systems, Inc.(b)............................................ 800 28,800
-----------
50,675
-----------
MANUFACTURED HOUSING -- 0.3%
Clayton Homes, Inc. ................................................. 3,900 78,000
-----------
MANUFACTURING -- 0.4%
Harsco Corp. ........................................................ 700 47,075
Measurex Corp. ...................................................... 1,600 46,800
-----------
93,875
-----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.3%
Beckman Instruments, Inc............................................. 1,100 41,800
Becton Dickinson & Co. .............................................. 200 16,050
DENTSPLY International, Inc. ........................................ 700 29,750
-----------
87,600
-----------
MEDICAL - HOSPITAL MANAGEMENT & SERVICES -- 1.1%
Columbia HCA Healthcare Corp......................................... 500 26,688
HEALTHSOUTH Corp.(b)................................................. 2,000 72,000
Healthcare Compare Corp.(b).......................................... 2,100 102,375
Health Care & Retirement Corp.(b).................................... 1,800 42,750
U.S. Healthcare, Inc. ............................................... 600 33,000
-----------
276,813
-----------
METAL FABRICATION -- 0.2%
Danaher Corp. ....................................................... 1,100 47,850
-----------
METALS - DIVERSIFIED -- 0.4%
Phelps Dodge Corp. .................................................. 700 43,662
Trinity Industries................................................... 1,400 47,600
-----------
91,262
-----------
</TABLE>
- ---------------
Continued
28
<PAGE> 31
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
OIL & GAS -- 3.5%
Atlantic Richfield Co. .............................................. 500 $ 59,250
Consolidated Natural Gas Co. ........................................ 500 26,125
Exxon Corp. ......................................................... 1,200 104,250
Kerr-McGee Corp. .................................................... 900 54,787
Mobil Corp. ......................................................... 1,000 112,125
Noble Drilling Corp.(b).............................................. 2,200 30,525
Parker & Parsley Petro Co. .......................................... 2,300 63,825
Phillips Petroleum Co. .............................................. 1,800 75,375
Reading & Bates Corp.(b)............................................. 2,100 46,462
Royal Dutch Petroleum................................................ 400 61,500
Smith International, Inc.(b)......................................... 2,400 72,300
Texaco, Inc. ........................................................ 700 58,713
Tidewater, Inc. ..................................................... 1,700 74,587
Valero Energy Corp. ................................................. 1,400 35,000
Williams Companies, Inc. ............................................ 600 29,700
-----------
904,524
-----------
PAPER & PAPER PRODUCTS -- 0.1%
Temple-Inland, Inc. ................................................. 800 37,400
-----------
PHARMACEUTICALS -- 3.3%
Abbott Laboratories.................................................. 1,300 56,550
Bergen Brunswig Corp., Class A....................................... 2,000 55,500
Bristol-Myers Squibb Co. ............................................ 1,100 99,000
Cardinal Health, Inc. ............................................... 1,100 79,337
Elan Corp. PLC, ADR(b)............................................... 900 51,414
Johnson & Johnson.................................................... 2,400 118,800
Mallinckrodt Group, Inc. ............................................ 1,600 62,200
Merck & Co, Inc. .................................................... 1,500 96,937
Pfizer, Inc. ........................................................ 1,300 92,787
Schering-Plough...................................................... 1,400 87,850
Watson Pharmaceutical, Inc.(b)....................................... 1,100 41,662
-----------
842,037
-----------
PUBLISHING -- 0.5%
New York Times Co., Class A.......................................... 1,300 42,413
Times Mirror Co., Class A............................................ 600 26,100
Washington Post, Class B............................................. 200 64,800
-----------
133,313
-----------
RAILROAD -- 0.4%
Illinois Central Corp. .............................................. 1,000 28,375
Norfolk Southern..................................................... 800 67,800
-----------
96,175
-----------
RESTAURANTS -- 0.1%
Outback Steakhouse, Inc.(b).......................................... 1,100 37,933
-----------
RETAIL - APPAREL -- 1.7%
Claire's Stores, Inc. ............................................... 1,700 46,963
Dollar General....................................................... 2,200 64,350
The Gap, Inc. ....................................................... 2,600 83,525
Liz Claiborne, Inc. ................................................. 1,100 38,088
Nike, Inc., Class B.................................................. 400 41,100
Ross Stores, Inc. ................................................... 2,000 69,500
TJX Companies, Inc. ................................................. 2,900 97,875
-----------
441,401
-----------
</TABLE>
- ---------------
Continued
29
<PAGE> 32
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
RETAIL - FOOD STORES -- 0.5%
American Stores Co. ................................................. 800 $ 33,000
Safeway, Inc.(b)..................................................... 1,700 56,100
Vons Companies, Inc.(b).............................................. 1,200 44,850
-----------
133,950
-----------
RETAIL - GENERAL MERCHANDISE -- 0.4%
Dayton-Hudson Corp. ................................................. 300 30,938
Sears Roebuck & Co. ................................................. 1,300 63,212
-----------
94,150
-----------
RETAIL - SPECIALTY STORES -- 0.3%
Staples, Inc.(b)..................................................... 3,700 72,150
-----------
STEEL -- 0.4%
Allegheny Ludlum Corp. .............................................. 2,800 52,850
Nucor Corp. ......................................................... 800 40,500
-----------
93,350
-----------
TELECOMMUNICATIONS - EQUIPMENT -- 0.5%
ADC Telecommunications, Inc.(b)...................................... 1,200 54,000
U.S. Robotics Corp.(b)............................................... 800 68,400
-----------
122,400
-----------
TIRES & RUBBER PRODUCTS -- 0.1%
Goodyear Tire Co. ................................................... 800 38,600
-----------
TOBACCO -- 0.6%
Philip Morris Co., Inc. ............................................. 1,400 145,600
Schweitzer-Mauduit International, Inc. .............................. 20 563
Universal Corp. ..................................................... 800 21,200
-----------
167,363
-----------
TOYS -- 0.1%
Hasbro, Inc. ........................................................ 800 28,600
-----------
UTILITIES - ELECTRIC -- 3.0%
Boston Edison Co. ................................................... 2,900 73,950
CMS Energy Corp. .................................................... 2,800 86,450
DQE, Inc. ........................................................... 3,400 93,500
Edison International................................................. 2,000 35,250
Florida Progress Corp. .............................................. 2,800 97,300
FPL Group, Inc. ..................................................... 1,600 73,600
General Public Utilities............................................. 3,600 126,900
Illinova Corp. ...................................................... 3,000 86,250
NIPSCO Industries.................................................... 900 36,225
Northern States Power................................................ 1,400 69,125
-----------
778,550
-----------
UTILITIES - GAS & PIPELINE -- 0.3%
MCN Corp. ........................................................... 1,900 46,313
NICOR, Inc. ......................................................... 1,500 42,563
-----------
88,876
-----------
</TABLE>
- ---------------
Continued
30
<PAGE> 33
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
UTILITIES - TELEPHONE -- 2.6%
Ameritech Corp. ..................................................... 1,400 $ 83,125
AT&T Corp. .......................................................... 1,900 117,800
BellSouth Corp. ..................................................... 2,600 110,175
Frontier Corp. ...................................................... 3,400 104,125
Southern New England Telecommunications.............................. 2,300 96,600
Southwestern Bell Corp. ............................................. 1,700 83,725
Sprint Corp. ........................................................ 1,600 67,200
-----------
662,750
-----------
Total Common Stocks................................................... 11,609,353
-----------
CORPORATE BONDS -- 5.0%
FINANCIAL SERVICES -- 2.3%
AT&T Capital Corp., 6.14%, 10/19/98.................................. $ 200,000 198,250
General Electric Capital Corp., 8.10%, 1/26/99....................... 200,000 207,500
Household Netherlands BV, 6.13%, 3/1/03, LOC: Household
International...................................................... 200,000 190,250
-----------
596,000
-----------
INDUSTRIAL GOODS & SERVICES -- 1.9%
Heinz Co., 6.88%, 1/15/03............................................ 200,000 199,000
Kellogg Co., 5.90%, 7/15/97.......................................... 300,000 298,875
-----------
497,875
-----------
UTILITIES ELECTRIC -- 0.8%
Delmarva Power & Light, 6.40%, 7/1/03................................ 200,000 191,750
-----------
Total Corporate Bonds................................................. 1,285,625
-----------
U.S. TREASURY OBLIGATIONS -- 42.0%
U.S. TREASURY BILLS -- 5.0%
7/25/96.............................................................. 231,000 230,208
8/1/96............................................................... 140,000 139,384
8/22/96.............................................................. 912,000 905,217
-----------
Total U.S. Treasury Bills............................................. 1,274,809
-----------
U.S. TREASURY NOTES -- 37.0%
6.13%, 5/31/97....................................................... 1,510,000 1,514,741
6.75%, 5/31/99....................................................... 1,400,000 1,416,058
6.25%, 8/31/00....................................................... 2,772,000 2,751,986
6.38%, 8/15/02....................................................... 2,400,000 2,379,696
6.50%, 5/15/05....................................................... 1,475,000 1,455,368
-----------
Total U.S. Treasury Notes............................................. 9,517,849
-----------
Total U.S. Treasury Obligations....................................... 10,792,658
-----------
</TABLE>
- ---------------
Continued
31
<PAGE> 34
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 6.9%
Federal Home Loan Mortgage Corp.:
5.50%, 10/1/98, Pool #G50236....................................... 542,802 $ 526,068
Federal National Mortgage Assoc.:
6.50%, 1/1/06, Pool #81690......................................... 540,451 521,881
7.50%, 5/1/07, Pool #124341........................................ 481,195 483,308
5.50%, 12/25/14, Series 1993-155, Class PD......................... 250,000 245,360
-----------
Total U.S. Government Agencies........................................ 1,776,617
-----------
INVESTMENT COMPANIES -- 3.3%
T. Rowe Price Foreign Equity Fund.................................... 54,400 848,640
-----------
Total Investment Companies............................................ 848,640
-----------
TOTAL (COST -- $26,153,772)(A)........................................ $26,312,893
Liabilities in Excess of Other Assets................................. (574,329)
-----------
NET ASSETS -- 100.0%.................................................. $25,738,564
===========
<FN>
- ---------------
Percentages indicated are based on net assets of $25,738,564.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
approximately $30,000. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
</TABLE>
<TABLE>
<S> <C>
Unrealized appreciation...................................... $ 740,220
Unrealized depreciation...................................... (610,879)
----------
Net unrealized appreciation.................................. $ 129,341
===========
<FN>
(b) Represents non-income producing securities.
ADR -- American Depositary Receipt
LOC -- Letter of Credit
</TABLE>
See Notes to Financial Statements.
32
<PAGE> 35
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS -- 64.1%
ADVERTISING -- 0.5%
Omnicom Group........................................................ 2,400 $ 111,600
-----------
AIR TRANSPORTATION -- 0.3%
Alaska Airgroup, Inc.(b)............................................. 1,600 43,800
AMR Corp.(b)......................................................... 300 27,300
-----------
71,100
-----------
AUTOMOBILES & TRUCKS -- 0.7%
Chrysler Corp. ...................................................... 1,500 93,000
Ford Motor Co. ...................................................... 1,800 58,275
-----------
151,275
-----------
AUTO PARTS -- 0.1%
Standard Products Co. ............................................... 1,300 30,225
-----------
BANKS -- 4.8%
Bank of Boston....................................................... 2,100 103,950
Citicorp............................................................. 2,000 165,250
Comerica, Inc. ...................................................... 4,200 187,425
First Tennessee National Corp. ...................................... 2,000 61,250
First Union Corp. (N.C.)............................................. 1,700 103,487
Firstar Corp. ....................................................... 1,900 87,638
J.P. Morgan & Co. ................................................... 1,000 84,625
NationsBank Corp. ................................................... 1,200 99,150
Northern Trust Corp. ................................................ 900 51,975
Regions Financial Corp. ............................................. 1,700 79,475
State Street Boston Corp. ........................................... 900 45,900
-----------
1,070,125
-----------
BEVERAGES -- 1.5%
Coca-Cola Co. ....................................................... 2,600 127,075
PepsiCo, Inc. ....................................................... 5,800 205,175
-----------
332,250
-----------
BUSINESS EQUIPMENT & SERVICES -- 1.3%
Equifax, Inc. ....................................................... 2,700 70,875
Harris Corp. ........................................................ 500 30,500
Kelly Services, Inc., Class A........................................ 1,700 49,725
Reynolds & Reynolds, Class A......................................... 1,700 90,525
Xerox Corp. ......................................................... 1,000 53,500
-----------
295,125
-----------
CHEMICALS - PETRO & INORGANIC -- 1.1%
Monsanto Corp. ...................................................... 3,700 120,250
Praxair, Inc. ....................................................... 2,800 118,300
-----------
238,550
-----------
</TABLE>
- ---------------
Continued
33
<PAGE> 36
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
CHEMICALS - SPECIALTY -- 0.6%
Goodrich (B.F.) Co. ................................................. 1,100 $ 41,112
Lubrizol Corp. ...................................................... 2,000 60,750
Morton International, Inc. .......................................... 900 33,525
-----------
135,387
-----------
COMPUTER HARDWARE -- 1.4%
Adaptec, Inc.(b)..................................................... 900 42,638
Cabletron Systems(b)................................................. 400 27,450
Cisco Systems, Inc.(b)............................................... 1,700 96,262
Gateway 2000, Inc.(b)................................................ 2,400 81,600
Komag, Inc.(b)....................................................... 3,000 79,125
-----------
327,075
-----------
COMPUTERS - MAIN & MINI -- 0.8%
Hewlett Packard...................................................... 1,400 139,475
Sun Microsystems, Inc.(b)............................................ 800 47,100
-----------
186,575
-----------
COMPUTER SERVICES -- 0.2%
Ceridian Corp.(b).................................................... 1,100 55,550
-----------
COMPUTER SOFTWARE -- 2.7%
BMC Software, Inc.(b)................................................ 1,100 65,725
Cadence Design Systems, Inc.(b)...................................... 2,150 72,563
Computer Associates, Inc. ........................................... 600 42,750
Compuware Corp.(b)................................................... 1,700 67,150
Microsoft Corp.(b)................................................... 1,200 144,150
Oracle Corp.(b)...................................................... 2,250 88,734
Parametric Technology Corp.(b)....................................... 2,700 117,113
-----------
598,185
-----------
CONTAINERS -- 0.8%
Bemis Co. ........................................................... 1,900 66,500
Crown Cork & Seal Co., Inc. ......................................... 1,100 49,500
Sonoco Products Co. ................................................. 2,100 59,588
-----------
175,588
-----------
COSMETICS & TOILETRIES -- 0.5%
Avon Products, Inc. ................................................. 1,400 63,175
Gillette Co. ........................................................ 700 43,662
-----------
106,837
-----------
DEFENSE -- 1.5%
General Dynamics Corp. .............................................. 800 49,600
Lockheed Martin Corp. ............................................... 1,000 84,000
Rockwell International Corp. ........................................ 1,400 80,150
United Technologies Corp. ........................................... 1,000 115,000
-----------
328,750
-----------
DIVERSIFIED PRODUCTS -- 1.5%
E.I. du Pont de Nemours.............................................. 1,600 126,600
Olin Corp. .......................................................... 1,100 98,175
Textron, Inc. ....................................................... 800 63,900
Whitman Corp. ....................................................... 2,000 48,250
-----------
336,925
-----------
</TABLE>
- ---------------
Continued
34
<PAGE> 37
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
ELECTRICAL EQUIPMENT -- 1.4%
General Electric..................................................... 2,500 $ 216,250
Honeywell, Inc. ..................................................... 1,300 70,850
Parker Hannifin Corp. ............................................... 800 33,900
-----------
321,000
-----------
ELECTRONIC COMPONENTS -- 2.2%
Atmel Corp.(b)....................................................... 4,700 141,588
Intel Corp. ......................................................... 1,900 139,531
International Rectifier Corp.(b)..................................... 4,100 66,112
Lattice Semiconductor Corp.(b)....................................... 1,700 41,012
Maxim Integrated Products(b)......................................... 1,300 35,506
Sundstrand Corp. .................................................... 2,200 80,575
-----------
504,324
-----------
ENTERTAINMENT -- 0.7%
King World Productions, Inc.(b)...................................... 1,500 54,562
The Walt Disney Co. ................................................. 1,819 114,370
-----------
168,932
-----------
FINANCIAL SERVICES -- 2.3%
Bear Stearns Companies, Inc. ........................................ 5,000 118,125
Dean Witter Discover & Co. .......................................... 1,400 80,150
Edwards (A.G.), Inc. ................................................ 2,600 70,525
Merrill Lynch & Co. ................................................. 1,300 84,662
SouthTrust Corp. .................................................... 2,600 73,125
SunAmerica, Inc. .................................................... 1,600 90,400
-----------
516,987
-----------
FOOD & RELATED -- 1.3%
Campbell Soup Co. ................................................... 1,200 84,600
ConAgra.............................................................. 1,800 81,675
IBP, Inc. ........................................................... 1,500 41,438
Interstate Bakeries.................................................. 1,300 34,775
Sara Lee Corp. ...................................................... 1,600 51,800
-----------
294,288
-----------
FURNITURE & FURNISHINGS -- 0.4%
Leggett & Platt, Inc. ............................................... 3,100 86,025
-----------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.9%
HFS, Inc.(b)......................................................... 1,200 84,000
ITT Corp.(b)......................................................... 600 39,750
Marriott International, Inc.......................................... 1,300 69,875
-----------
193,625
-----------
HOUSEHOLD - GENERAL PRODUCTS -- 0.9%
Clorox Co. .......................................................... 700 62,037
First Brands Corp. .................................................. 1,700 45,900
Lancaster Colony Corp. .............................................. 1,200 44,850
Newell Co. .......................................................... 2,000 61,250
-----------
214,037
-----------
HOUSING -- 0.2%
PHH Corp. ........................................................... 900 51,300
-----------
</TABLE>
- ---------------
Continued
35
<PAGE> 38
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
INSURANCE -- 1.5%
Allstate Insurance................................................... 1,700 $ 77,562
ACE Ltd. ............................................................ 1,100 51,700
CIGNA Corp. ......................................................... 500 58,938
EXEL Ltd. ........................................................... 600 42,300
Providian Corp. ..................................................... 1,400 60,025
SAFECO Corp. ........................................................ 1,200 42,450
-----------
332,975
-----------
LEISURE TIME INDUSTRY -- 1.1%
Callaway Golf Co. ................................................... 2,600 86,450
Harley-Davidson, Inc. ............................................... 1,400 57,575
Mirage Resorts, Inc.(b).............................................. 1,900 102,600
-----------
246,625
-----------
MACHINE - DIVERSIFIED -- 0.4%
Briggs & Stratton.................................................... 1,500 61,688
Duriron Co. ......................................................... 1,500 36,000
-----------
97,688
-----------
MACHINERY & EQUIPMENT -- 0.3%
Ingersoll-Rand Co. .................................................. 600 26,250
Novellus Systems, Inc.(b)............................................ 900 32,400
-----------
58,650
-----------
MANUFACTURED HOUSING -- 0.4%
Clayton Homes, Inc. ................................................. 4,800 96,000
-----------
MANUFACTURING -- 0.5%
Harsco Corp. ........................................................ 900 60,525
Measurex Corp. ...................................................... 1,900 55,575
-----------
116,100
-----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.5%
Beckman Instruments, Inc. ........................................... 1,400 53,200
Becton Dickinson & Co. .............................................. 300 24,075
DENTSPLY International, Inc. ........................................ 800 34,000
-----------
111,275
-----------
MEDICAL - HOSPITAL MANAGEMENT & SERVICE -- 1.5%
Columbia HCA Healthcare Corp. ....................................... 700 37,363
HEALTHSOUTH Corp.(b)................................................. 2,300 82,800
Healthcare Compare Corp.(b).......................................... 2,500 121,875
Health Care & Retirement Corp.(b).................................... 2,100 49,875
U.S. Healthcare, Inc. ............................................... 700 38,500
-----------
330,413
-----------
METAL FABRICATION -- 0.3%
Danaher Corp. ....................................................... 1,300 56,550
-----------
METALS - DIVERSIFIED -- 0.5%
Phelps Dodge Corp. .................................................. 900 56,138
Trinity Industries................................................... 1,700 57,800
-----------
113,938
-----------
</TABLE>
- ---------------
Continued
36
<PAGE> 39
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
OIL & GAS -- 5.1%
Atlantic Richfield Co. .............................................. 700 $ 82,950
Consolidated Natural Gas Co. ........................................ 700 36,575
Exxon Corp. ......................................................... 1,600 139,000
Kerr-McGee Corp. .................................................... 1,000 60,875
Mobil Corp. ......................................................... 1,200 134,550
Noble Drilling Corp.(b).............................................. 2,600 36,075
Parker & Parsley Petro Co. .......................................... 2,700 74,925
Phillips Petroleum Co. .............................................. 2,300 96,313
Reading & Bates Corp.(b)............................................. 2,400 53,100
Royal Dutch Petroleum................................................ 600 92,250
Smith International, Inc.(b)......................................... 2,800 84,350
Texaco, Inc. ........................................................ 900 75,488
Tidewater, Inc. ..................................................... 2,100 92,137
Valero Energy Corp. ................................................. 1,700 42,500
Williams Companies, Inc. ............................................ 800 39,600
-----------
1,140,688
-----------
PAPER & PAPER PRODUCTS -- 0.2%
Temple-Inland, Inc. ................................................. 1,000 46,760
-----------
PHARMACEUTICALS -- 4.7%
Abbott Laboratories.................................................. 1,700 73,950
Bergen Brunswig Corp., Class A....................................... 2,300 63,825
Bristol-Myers Squibb Co. ............................................ 1,500 135,000
Cardinal Health, Inc. ............................................... 1,300 93,762
Elan Corp. PLC, ADR(b)............................................... 1,100 62,837
Johnson & Johnson.................................................... 3,100 153,450
Mallinckrodt Group, Inc. ............................................ 1,900 73,862
Merck & Co, Inc. .................................................... 1,900 122,788
Pfizer, Inc. ........................................................ 1,600 114,200
Schering-Plough...................................................... 1,800 112,950
Watson Pharmaceutical, Inc.(b)....................................... 1,300 49,237
-----------
1,055,861
-----------
PUBLISHING -- 0.8%
New York Times Co., Class A.......................................... 1,700 55,462
Times Mirror Co., Class A............................................ 600 26,100
Washington Post, Class B............................................. 300 97,200
-----------
178,762
-----------
RAILROAD -- 0.6%
Illinois Central Corp. .............................................. 1,200 34,050
Norfolk Southern..................................................... 1,100 93,225
-----------
127,275
-----------
RESTAURANTS -- 0.2%
Outback Steakhouse, Inc.(b).......................................... 1,300 44,830
-----------
RETAIL - APPAREL -- 2.3%
Claire's Stores, Inc. ............................................... 2,000 55,250
Dollar General....................................................... 2,600 76,050
The Gap, Inc. ....................................................... 3,300 106,013
Liz Claiborne, Inc. ................................................. 1,300 45,013
Nike, Inc., Class B.................................................. 500 51,375
Ross Stores, Inc. ................................................... 2,300 79,925
TJX Companies, Inc. ................................................. 3,400 114,750
-----------
528,376
-----------
</TABLE>
- ---------------
Continued
37
<PAGE> 40
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
RETAIL - FOOD STORES -- 0.7%
American Stores Co. ................................................. 1,100 $ 45,375
Safeway, Inc.(b)..................................................... 2,200 72,600
Vons Companies, Inc.(b).............................................. 1,400 52,325
-----------
170,300
-----------
RETAIL - GENERAL MERCHANDISE -- 0.6%
Dayton-Hudson Corp. ................................................. 400 41,250
Sears Roebuck & Co. ................................................. 1,800 87,525
-----------
128,775
-----------
RETAIL - SPECIALTY STORES -- 0.4%
Staples, Inc.(b)..................................................... 4,400 85,800
-----------
STEEL -- 0.5%
Allegheny Ludlum Corp. .............................................. 3,300 62,287
Nucor Corp. ......................................................... 1,000 50,625
-----------
112,912
-----------
TELECOMMUNICATIONS - EQUIPMENT -- 0.7%
ADC Telecommunications, Inc.(b)...................................... 1,400 63,000
U.S. Robotics Corp.(b)............................................... 1,000 85,500
-----------
148,500
-----------
TIRES & RUBBER PRODUCTS -- 0.2%
Goodyear Tire Co. ................................................... 1,000 48,250
-----------
TOBACCO -- 0.9%
Phillip Morris Co., Inc. ............................................ 1,700 176,800
Schweitzer-Mauduit International, Inc. .............................. 20 563
Universal Corp. ..................................................... 1,000 26,500
-----------
203,863
-----------
TOYS -- 0.2%
Hasbro, Inc. ........................................................ 1,000 35,750
-----------
UTILITIES - ELECTRIC -- 4.2%
Boston Edison Co. ................................................... 3,400 86,700
CMS Energy Corp. .................................................... 3,300 101,887
DQE, Inc. ........................................................... 4,000 110,000
Edison International................................................. 2,500 44,063
Florida Progress Corp. .............................................. 3,300 114,675
FPL Group, Inc. ..................................................... 2,100 96,600
General Public Utilities............................................. 4,500 158,625
Illinova Corp. ...................................................... 3,500 100,625
NIPSCO Industries.................................................... 1,000 40,250
Northern States Power................................................ 1,700 83,938
-----------
937,363
-----------
UTILITIES - GAS & PIPELINE -- 0.5%
MCN Corp. ........................................................... 2,300 56,062
NICOR, Inc. ......................................................... 1,800 51,075
-----------
107,137
-----------
</TABLE>
- ---------------
Continued
38
<PAGE> 41
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
UTILITIES - TELEPHONE -- 3.7%
Ameritech Corp. ..................................................... 1,800 $ 106,875
AT&T Corp. .......................................................... 2,400 148,800
BellSouth Corp. ..................................................... 3,400 144,075
Frontier Corp. ...................................................... 4,000 122,500
Southern New England Telecommunications.............................. 2,800 117,600
Southwestern Bell Corp. ............................................. 2,200 108,350
Sprint Corp. ........................................................ 2,100 88,200
-----------
836,400
-----------
Total Common Stocks................................................... 14,399,446
-----------
CORPORATE BONDS -- 2.8%
FINANCIAL SERVICES -- 1.3%
AT&T Capital Corp., 6.14%, 10/19/98.................................. $ 100,000 99,125
General Electric Capital Corp., 8.10%, 1/26/99....................... 100,000 103,750
Household Netherlands BV, 6.13%, 3/1/03,
LOC: Household International....................................... 100,000 95,125
-----------
298,000
-----------
INDUSTRIAL GOODS & SERVICES -- 1.1%
Heinz Co., 6.88%, 1/15/03............................................ 100,000 99,500
Kellogg Co., 5.90%, 7/15/97.......................................... 150,000 149,438
-----------
248,938
-----------
UTILITIES - ELECTRIC -- 0.4%
Delmarva Power & Light, 6.40%, 7/1/03................................ 100,000 95,875
-----------
Total Corporate Bonds................................................. 642,813
-----------
U.S. TREASURY OBLIGATIONS -- 29.2%
U.S. TREASURY BILLS -- 10.3%
7/25/96.............................................................. 1,424,000 1,419,097
8/1/96............................................................... 64,000 63,718
8/22/96.............................................................. 831,000 824,847
-----------
Total U.S. Treasury Bills............................................. 2,307,662
-----------
U.S. TREASURY NOTES -- 18.9%
6.13%, 5/31/97....................................................... 400,000 401,256
6.25%, 8/31/00....................................................... 1,370,000 1,360,109
6.38%, 8/15/02....................................................... 1,160,000 1,150,186
6.50%, 5/15/05....................................................... 1,365,000 1,346,831
-----------
Total U.S. Treasury Notes............................................. 4,258,382
-----------
Total U.S. Treasury Obligations....................................... 6,566,044
-----------
</TABLE>
- ---------------
Continued
39
<PAGE> 42
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------------------- --------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 7.6%
Federal Home Loan Mortgage Corp.:
5.50%, 10/1/98, Pool #G50236....................................... $ 542,802 $ 526,068
Federal National Mortgage Assoc.:
6.50%, 1/1/06, Pool #81690......................................... 205,865 198,791
7.50%, 5/1/07, Pool #124341........................................ 481,195 483,308
5.50%, 12/25/14, Series 1993-155, Class PD......................... 500,000 490,720
-----------
Total U.S. Government Agencies........................................ 1,698,887
-----------
INVESTMENT COMPANIES -- 3.1%
T. Rowe Price Foreign Equity Fund.................................... 44,900 700,440
-----------
Total Investment Companies............................................ 700,440
-----------
TOTAL (COST -- $23,698,505)(A)........................................ $24,007,630
Liabilities in Excess of Other Assets................................. (1,533,385)
-----------
NET ASSETS -- 100.0%.................................................. $22,474,245
===========
<FN>
- ---------------
Percentages indicated are based on net assets of $22,474,245.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
approximately $2,000. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
</TABLE>
<TABLE>
<S> <C>
Unrealized appreciation...................................... $ 835,910
Unrealized depreciation...................................... (528,903)
----------
Net unrealized appreciation.................................. $ 307,007
===========
<FN>
(b) Represents non-income producing securities.
ADR -- American Depositary Receipt
LOC -- Letter of Credit
</TABLE>
See Notes to Financial Statements.
40
<PAGE> 43
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements
June 30, 1996
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Time Horizon Funds (the "Company"), was organized on April 12, 1995 as an
open-end management investment company established as a Delaware business trust
and is registered under the Investment Company Act of 1940 (the "1940 Act").
Between the date of organization and the date of initial sale of shares to the
public, the Company had no operations other than incurring organizational
expenses, the sale of initial units of beneficial interest ("shares") and the
realization of income earned on the seed money. The Company offers shares of the
following funds: Time Horizon Portfolio 1 ("Portfolio 1"), Time Horizon
Portfolio 2 ("Portfolio 2"), and Time Horizon Portfolio 3 ("Portfolio 3")
(individually, a "Fund" and collectively, the "Funds"), each of which offers
Class A and Class B shares. Class A shares are offered at net asset value plus
an initial sales charge and are subject to a shareholder servicing fee. Class B
shares are offered at net asset value without a sales charge but are subject to
a contingent deferred sales charge, plus distribution plan and shareholder
servicing fees. Class B shares will convert to Class A shares on the first
business day of the month following the eighth anniversary of the date of
purchase.
The Time Horizon Funds' investment objective is to provide long term
investors maximum total return over a stated investment time period while also
increasingly emphasizing capital preservation as each Fund approaches its target
time horizon. The Funds invest primarily in equity and fixed income securities.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Company in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses for the period.
Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments in securities that are primarily traded on a domestic exchange
or traded on the NASDAQ National Market System are valued at the last sale price
on the exchange or market where primarily traded or listed or if there is no
recent sale price available, at the last current bid quotation. Securities not
so traded are valued at the last current bid quotation if market quotations are
available. Except for short-term securities with remaining maturities of 60 days
or less ("Short-Term Securities"), fixed income securities are valued by using
market quotations, or independent pricing services that use prices provided by
market makers or estimates of market values obtained from yield data
41
<PAGE> 44
relating to instruments or securities with similar characteristics. Short-Term
Securities are valued at amortized cost, which approximates market value.
Investments in investment companies are valued at their net asset values as
reported by such companies. Other securities for which quotations are not
readily available are valued at their fair value under procedures established by
the Company's Board of Trustees. The differences between the cost and market
values of investments held by the Funds are reflected as either unrealized
appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date ). Interest income is recognized on the accrual
basis and includes, where applicable, the amortization of premium or discount.
Dividend income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the
security lot sold with the net proceeds of sales.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from financial institutions such
as banks and broker dealers which Bank of America National Trust and Saving
Association ("Bank of America" or the "Manager") deems creditworthy under
guidelines approved by the Board of Trustees, subject to the seller's agreement
to repurchase such securities at a mutually agreed-upon date and price. The
repurchase price generally equals the price paid by each Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller, under a
repurchase agreement, is required to maintain the value of collateral held
pursuant to the agreement at 102% of the repurchase price (including accrued
interest). If the seller defaulted on its repurchase obligation, a Fund would
suffer a loss to the extent that the proceeds from a sale of the underlying
securities were less than the repurchase price under the agreement. Bankruptcy
or insolvency of such a defaulting seller may cause the particular Fund's rights
with respect to such securities to be delayed or limited. Securities subject to
repurchase agreements are held by the Funds' custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans by the Funds under the 1940 Act.
ORGANIZATION EXPENSES:
All costs incurred by the Company in connection with the organization of the
Funds and the initial public offering of shares of the Funds, principally
professional fees and printing, have been deferred. Upon commencement of
investment operations of each Fund, the deferred organization expenses are being
amortized on a straight-line basis over a period of five years. In the event
that any of the initial shares of the Funds are redeemed during the amortization
period by any holder thereof, the redemption proceeds will be reduced by any
unamortized organization expenses in the same proportion as the number of said
shares being redeemed bears to the number of initial shares that are outstanding
at the time of the redemption.
42
<PAGE> 45
LEGAL FEES:
Legal counsel to the Funds has agreed not to charge the Funds for services
on routine matters for the first year after the effective date of the Funds'
registration statement, which was August 4, 1995.
OTHER:
Expenses that are directly related to one of the Funds are charged directly
to that Fund and are allocated to each class of shares based on the relative net
assets of each class, except that distribution plan fees are allocated only to
Class B Shares. Other operating expenses are prorated to the Funds on the basis
of relative net assets.
NOTE 3 -- PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
period from September 5, 1995 (commencement of operations) through June 30, 1996
are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Portfolio 1.............. $35,213,207 $10,337,186
Portfolio 2.............. 33,859,413 8,972,607
Portfolio 3.............. 27,581,438 6,436,312
</TABLE>
NOTE 4 -- DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income are declared and paid annually and
distributable net realized capital gains, if any, are declared and distributed
at least annually for Class A Shares and Class B Shares of the Funds.
Dividends from net investment income and net realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
NOTE 5 -- FEDERAL INCOME TAXES
It is the policy of each of the Funds to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies, as defined in applicable sections of the Internal Revenue Code, and
to make distributions of net investment income and net realized capital gains
sufficient to relieve it from all, or substantially all, Federal income taxes.
NOTE 6 -- RELATED PARTY TRANSACTIONS
Bank of America National Trust and Savings Association ("Bank of America")
serves as the Funds' Manager, providing investment advisory and administrative
services. Bank of America is a subsidiary of BankAmerica Corporation, a
registered bank holding company. Under the terms of the management agreement
with the Company, Bank of America is entitled to receive fees based on a
percentage of the average net assets of each Fund.
Pursuant to the authority granted in its management agreement, Bank of
America has entered into a Sub-Administration Agreement with BISYS Fund
Services, Inc. ("BISYS"), under which BISYS will perform certain of the services
to be provided under the management agreement.
BYSIS Fund Services Ohio, Inc. serves as fund accountant and transfer and
dividend disbursing agent of the Funds. Fund accounting fees are computed based
upon the greater of $2,500 monthly or the following annual fee schedule: 0.0125%
of average net assets between $10 million and $50 million; 0.025% of average net
assets between $50 million and $200 million; 0.020% of next $200 million and
$500 million of average net assets; and 0.015% of
43
<PAGE> 46
average net assets greater than $500 million. In addition, an annual maintenance
fee of $20 per account will be charged for transfer and disbursing agent
services.
Concord Financial Group, Inc. (the "Distributor") serves as distributor of
the Funds' shares. For the period from September 5, 1995, through June 30, 1996,
the Distributor received $690,123 from commissions earned on sales of shares of
the Funds, $614,110 of which was reallowed to other broker/dealers.
BISYS, BISYS Fund Services Ohio, Inc. and the Distributor are each wholly
owned subsidiaries of The BISYS Group, Inc.
The Company has adopted a Shareholder Service Plan for Class A shares and
Class B shares, under which the Class A shares and Class B shares of the Funds
reimburse the Distributor and Service Organizations for shareholder servicing
fees incurred. Under the Shareholder Service Plan, payments by a Fund for
shareholder servicing expenses may not exceed an annual rate of 0.25% of the
Fund's average daily net assets. The Company has also adopted a Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act, under which the Class B shares
of each Fund compensate the Distributor for services rendered and costs incurred
in connection with distribution of the Class B shares. Under the Distribution
Plan, payments by the Class B shares of a Fund for distribution expenses are
incurred at the annual rate of 0.75% of the average daily net assets of the Fund
attributable to the Class B shares.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in those capacities.
Bank of America has agreed to voluntarily reduce its fees, absorb and/or
reimburse operating expenses for the first twelve months of the Funds'
operations to ensure that the operating expenses for each Fund do not exceed
1.00% and 1.75% (annualized) of the average net assets of each Fund's Class A
and Class B Shares, respectively.
Information regarding related party transactions is as follows for the
period from September 5, 1995 through June 30, 1996:
<TABLE>
<CAPTION>
PORTFOLIO PORTFOLIO PORTFOLIO
1 2 3
--------- --------- ---------
<S> <C> <C> <C>
MANAGEMENT FEES:
Annual fee before voluntary fee reductions (Percentage of average net
assets)............................................................... .60% .60% .60%
Voluntary fee reductions............................................... $ 66,867 $ 60,070 $ 49,313
12B-1 FEES (CLASS B):
Annual fee (Percentage of average net assets).......................... .75% .75% .75%
SHAREHOLDER SERVICES FEES:
Annual fee before voluntary fee reductions (Percentage of average net
assets)............................................................... .25% .25% .25%
Voluntary fee reductions (Class A)..................................... $ 7,774 $ 8,058 $ 6,118
Voluntary fee reductions (Class B)..................................... $ 16,851 $ 14,167 $ 11,998
EXPENSES REIMBURSED:................................................... $121,917 $117,138 $101,252
TRANSFER AGENT FEES:
Voluntary fee reductions............................................... $ 53,202 $ 57,938 $ 58,181
</TABLE>
44
<PAGE> 47
NOTE 7 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Funds are summarized below (amounts
in thousands):
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
---------------------- ---------------------- ----------------------
SEPTEMBER 5, 1995 SEPTEMBER 5, 1995 SEPTEMBER 5, 1995
TO TO TO
JUNE 30, 1996(A) JUNE 30, 1996(A) JUNE 30, 1996(A)
---------------------- ---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Issued......................... 741 $7,708 786 $8,218 587 $6,216
Reinvested..................... 1 13 1 14 1 7
Redeemed....................... (68) (722) (98) (1,036) (37) (402)
------ ------- ------ ------- ------ -------
Net increase -- Class A........... 674 6,999 689 7,196 551 5,821
------ ------- ------ ------- ------ -------
Class B Shares
Issued......................... 1,908 19,757 1,798 18,814 1,644 17,430
Reinvested..................... 2 26 2 19 1 14
Redeemed....................... (148) (1,558) (83) (877) (136) (1,457)
------ ------- ------ ------- ------ -------
Net increase -- Class B........... 1,762 18,225 1,717 17,956 1,509 15,987
------ ------- ------ ------- ------ -------
Net increase in Fund.............. 2,436 $25,224 2,406 $25,152 2,060 $21,808
====== ======= ====== ======= ====== =======
<FN>
- ---------------
(a) Period from commencement of operations.
</TABLE>
NOTE 8 -- FEDERAL INCOME TAX INFORMATION
The Time Horizon Funds designate the following eligible distributions for
the dividends received deduction for corporations for the taxable year ended
June 30, 1996 for Portfolio 1 and the taxable year ended April 30, 1996 for
Portfolio 2 and Portfolio 3:
<TABLE>
<CAPTION>
DIVIDEND
DIVIDEND INCOME
INCOME PER SHARE
-------- ---------
<S> <C> <C>
Portfolio 1........................................................................ $61,857
Class A......................................................................... .007
Class B......................................................................... .006
Portfolio 2........................................................................ $38,878
Class A......................................................................... .009
Class B......................................................................... .008
Portfolio 3........................................................................ $43,680
Class A......................................................................... .012
Class B......................................................................... .010
</TABLE>
45
<PAGE> 48
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1
------------------------------
CLASS A CLASS B
------------ ------------
SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO
JUNE 30, JUNE 30,
1996(A) 1996(A)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 10.04(d) $ 10.04(d)
------------ ------------
Investment Activities:
Net investment income........................... 0.22 0.18
Net realized and unrealized gains on
investments................................... 0.45 0.43
------------ ------------
0.67 0.61
------------ ------------
Distributions:
Net investment income........................... (0.06) (0.05)
------------ ------------
NET ASSET VALUE, END OF PERIOD.................... $ 10.65 $ 10.60
============ ============
Total Return (excludes sales and redemption
charges)........................................ 6.68%(b) 6.09%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)............... $ 7,172 $ 18,681
Ratio of expenses to average net assets......... 0.49%(c) 1.29%(c)
Ratio of net investment income to average net
assets........................................ 3.96%(c) 3.16(c)
Ratio of expenses to average net assets*........ 2.95%(c) 3.65%(c)
Ratio of net investment income to average net
assets*....................................... 1.50%(c) 0.80%(c)
Portfolio turnover**............................ 72% 72%
Average commission rate paid(e)................. $ 0.0652 $ 0.0652
<FN>
- ---------------
* 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 commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Net asset value includes the effect of income earned on initial seed money
for the period from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the fund
as a whole without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
46
<PAGE> 49
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 2
------------------------------
CLASS A CLASS B
------------ ------------
SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO
JUNE 30, JUNE 30,
1996(A) 1996(A)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 10.04(d) $ 10.04(d)
------------ ------------
Investment Activities:
Net investment income........................... 0.21 0.15
Net realized and unrealized gains on
investments................................... 0.54 0.54
------------ ------------
0.75 0.69
------------ ------------
Distributions:
Net investment income........................... (0.06) (0.05)
------------ ------------
NET ASSET VALUE, END OF PERIOD.................... $ 10.73 $ 10.68
============ ============
Total Return (excludes sales and redemption
charges)........................................ 7.48%(b) 6.88%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)............... $ 7,389 $ 18,350
Ratio of expenses to average net assets......... 0.50%(c) 1.32%(c)
Ratio of net investment income to average net
assets........................................ 3.72%(c) 2.92%(c)
Ratio of expenses to average net assets*........ 3.12%(c) 3.87%(c)
Ratio of net investment income to average net
assets*....................................... 1.10%(c) 0.37%(c)
Portfolio turnover**............................ 72% 72%
Average commission rate paid(e)................. $ 0.0592 $ 0.0592
<FN>
- ---------------
* 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 commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Net asset value includes the effect of income earned on initial seed money
for the period from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the fund
as a whole without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
47
<PAGE> 50
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 3
------------------------------
CLASS A CLASS B
------------ ------------
SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO
JUNE 30, JUNE 30,
1996(A) 1996(A)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 10.04(d) $ 10.04(d)
------------ ------------
Investment Activities:
Net investment income........................... 0.18 0.12
Net realized and unrealized gains on
investments................................... 0.77 0.78
------------ ------------
0.95 0.90
------------ ------------
Distributions:
Net investment income........................... (0.05) (0.04)
------------ ------------
NET ASSET VALUE, END OF PERIOD.................... $ 10.94 $ 10.90
============ ============
Total Return (excludes sales and redemption
charges)........................................ 9.46%(b) 8.98%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)............... $ 6,033 $ 16,441
Ratio of expenses to average net assets......... 0.51%(c) 1.34%(c)
Ratio of net investment income to average net
assets........................................ 3.29%(c) 2.47%(c)
Ratio of expenses to average net assets*........ 3.32%(c) 4.08%(c)
Ratio of net investment income to average net
assets*....................................... 0.48%(c) (0.27)%(c)
Portfolio turnover**............................ 66% 66%
Average commission rate paid(e)................. $ 0.0584 $ 0.0584
<FN>
- ---------------
* 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 commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Net asset value includes the effect of income earned on initial seed money
for the period from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the fund
as a whole without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
48
<PAGE> 51
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
Time Horizon Funds
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolio investments, of Time Horizon Portfolio 1,
Time Horizon Portfolio 2 and Time Horizon Portfolio 3, series of Time Horizon
Funds (collectively the "Funds"), as of June 30, 1996, and the related
statements of operations, changes in net assets, and the financial highlights
for the period from September 5, 1995 (commencement of operations) to June 30,
1996. These financial statements and financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
the Funds as of June 30, 1996, and the results of their operations, changes in
their net assets, and the financial highlights for the period from September 5,
1995 (commencement of operations) to June 30, 1996, in conformity with generally
accepted accounting principles.
August 19, 1996
/s/ Ernst & Young LLP
49
<PAGE> 52
For more information, complete the following form and mail it to:
Time Horizon Funds
1230 Columbia Street
Suite 500
San Diego, CA 92101-8502
.............................................................................
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 Time Horizon Fund.
.............................................................................
Name of Broker
.............................................................................
Name of Brokerage Firm
/ / I purchased my Time Horizon Fund without the assistance of a broker.
I want to find out more about Bank of America-managed mutual funds. Please
send me a free investing kit on the mutual funds selected below. The kit
includes a prospectus, which has more complete information on the Fund(s),
including charges and expenses. Read the prospectus carefully before
investing or sending money.
/ / THE TIME HORIZON FUNDS
/ / For goals expected around the year 2005
/ / For goals expected around the year 2015
/ / For goals expected around the year 2025
/ / PACIFIC HORIZON FUNDS with the following investment goals:
/ / Aggressive Growth
/ / Conservative Growth
/ / Growth Combined With Income
/ / Current Income
/ / Tax-Free Income
Additional Comments:
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
<PAGE> 53
TMH-0033
