<PAGE> 1
PROSPECTUS
FEBRUARY 5, 1996
TIME HORIZON PORTFOLIO 1
TIME HORIZON PORTFOLIO 2
TIME HORIZON PORTFOLIO 3
Investment Funds offered by Time Horizon Funds
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The Time Horizon Series of Funds consists of three asset allocation funds
offered by Time Horizon Funds, an open-end management investment company (the
"Company") registered under the Investment Company Act of 1940 (the "1940 Act").
By this Prospectus, Time Horizon Funds is offering shares in three funds, Time
Horizon Portfolio 1 ("Portfolio 1"), Time Horizon Portfolio 2 ("Portfolio 2")
and Time Horizon Portfolio 3 ("Portfolio 3") (each individually a "Fund" and
collectively the "Funds" or "Time Horizon Series of Funds").
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. Each Fund targets a specific investment time horizon (the year
2005 for Portfolio 1, the year 2015 for Portfolio 2 and the year 2025 for
Portfolio 3). Investors are encouraged to choose the appropriate Time Horizon
Fund depending upon their evaluation of the anticipated timing of major
investment goals such as sending a child to college, nearing retirement or
purchasing a home.
Bank of America National Trust and Savings Association ("Bank of America" or the
"Manager") serves as the Funds' manager. Based in San Francisco, California,
Bank of America and its affiliates have over $50 billion under management, of
which over $10 billion is in mutual funds.
This Prospectus describes concisely the information about the Funds and the
Company that you should know before investing. Please read it carefully and
retain it for future reference.
More information about the Funds is contained in a Statement of Additional
Information that has been filed with the Securities and Exchange Commission. To
obtain a free copy, call (800) 247-9728. The Statement of Additional
Information, as it may be revised from time to time, is dated February 5, 1996
and is incorporated by reference into this Prospectus.
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Fund shares are not bank deposits or obligations of, or guaranteed or endorsed
by, Bank of America or any of its affiliates and are not federally insured by,
guaranteed by, obligations of or otherwise supported by the U.S. Government, the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
governmental agency. Investment in a Fund involves investment risk, including
the possible loss of principal amount invested.
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LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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This Prospectus is part of a Registration Statement that has been filed with the
Securities and Exchange Commission in Washington, D.C. under the Securities Act
of 1933.
No person has been authorized to give any information or to make any
representations in connection with the offer of a Fund's shares, other than as
contained in this Prospectus and the Fund's official sales literature.
Therefore, other information and representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer in any State in which, or to any person to whom, such offering may not
lawfully be made.
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<PAGE> 2
CONTENTS
<TABLE>
<S> <C> <C>
EXPENSE SUMMARY 2
FINANCIAL HIGHLIGHTS 4
FUND INVESTMENTS 5 INVESTMENT OBJECTIVES
5 ASSET ALLOCATION
6 UPON REACHING THE TIME HORIZON
6 RISK FACTORS
6 TYPES OF INVESTMENTS
8 FUNDAMENTAL LIMITATIONS
9 OTHER INVESTMENT PRACTICES AND CONSIDERATIONS
SHAREHOLDER GUIDE 13 HOW TO BUY SHARES
13 What Is My Minimum Investment In A Fund?
13 What Alternative Sales Arrangements Are Available?
14 How Are Shares Priced?
17 How Do I Decide Which Class To Buy?
18 How Can I Buy Shares?
20 What Price Will I Receive When I Buy Shares?
21 What Else Should I Know To Make A Purchase?
21 HOW TO SELL SHARES
21 How Do I Redeem My Shares?
23 What "NAV" Will I Receive For Shares I Want To Sell?
23 What Kind Of Paperwork Is Involved In Selling Shares?
24 How Quickly Can I Receive My Redemption Proceeds?
24 Do I Have Any Reinstatement Privileges After I Have
Redeemed Shares?
24 DIVIDEND AND DISTRIBUTION POLICIES
SHAREHOLDER SERVICES 25 CAN I USE A FUND IN MY RETIREMENT PLAN?
25 CAN I EXCHANGE MY INVESTMENT FROM ONE FUND
TO ANOTHER?
26 WHAT IS TELETRADE?
26 CAN I ARRANGE TO HAVE AUTOMATIC INVESTMENTS MADE ON A
REGULAR BASIS?
26 WHAT IS DOLLAR COST AVERAGING AND HOW CAN I IMPLEMENT IT?
27 CAN I ARRANGE PERIODIC WITHDRAWALS?
27 CAN MY DIVIDENDS FROM A FUND BE INVESTED
IN OTHER FUNDS?
27 IS THERE A SALARY DEDUCTION PLAN AVAILABLE?
THE BUSINESS OF THE FUNDS 28 BOARD OF TRUSTEES
28 EXPENSES
28 MANAGER
29 FUND ACCOUNTANT
29 DISTRIBUTOR
29 CUSTODIAN AND TRANSFER AGENT
29 FEE WAIVERS
PLAN PAYMENTS 30 THE SHAREHOLDER SERVICE PLAN
30 THE DISTRIBUTION PLAN
TAX INFORMATION 31 FEDERAL TAXES
32 STATE AND LOCAL TAXES
MEASURING PERFORMANCE 32
DESCRIPTION OF SHARES 33 ABOUT THE COMPANY
33 VOTING RIGHTS
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DISTRIBUTOR: MANAGER:
Concord Financial Group, Inc. Bank of America National Trust and Savings Association
BISYS Fund Group, Inc. 555 California Street
3435 Stelzer Road San Francisco, CA 94104
Columbus, OH 43219
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</TABLE>
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EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when buying or selling
shares of a Fund. The Company offers two classes of shares. Class A shares are
offered at net asset value plus an initial sales charge (see page 14 of the
Prospectus for an explanation of net asset value per shares) and are subject to
a shareholder servicing fee. Class B shares are offered at net asset value
without a sales charge but 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.
ANNUAL FUND OPERATING EXPENSES include payments by a Fund which are allocable to
the Fund. Operating expenses include fees for portfolio management, maintenance
of shareholder accounts, general administration, distribution plan, shareholder
servicing, accounting and other services.
Below is a summary of the shareholder transaction expenses charged by each Fund
for Class A and Class B shares and each Fund's estimated operating expenses for
the first twelve months of operations. A hypothetical example based on the
summary is also shown.
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------------- ----------------- -----------------
CLASS CLASS CLASS CLASS CLASS CLASS
SHAREHOLDER TRANSACTION EXPENSES A B A B A B
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)+............... 4.50% None 4.50% None 4.50% None
Sales Load Imposed on Reinvested Dividends..... None None None None None None
Maximum Contingent Deferred Sales Load......... None 5.00% None 5.00% None 5.00%
Redemption Fee................................. None None None None None None
Exchange Fee................................... None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets
after expense reimbursements*)
Management Fees (after expense
reimbursements*)............................. 0.30% 0.30% 0.30% 0.30% 0.30% 0.30%
12b-1 Fees..................................... None 0.75% None 0.75% None 0.75%
All Other Estimated Expenses
(after expense reimbursements*)
Shareholder Service Payments............... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Estimated Expenses................... 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
Total Estimated Fund Operating Expenses........ 1.00% 1.75% 1.00% 1.75% 1.00% 1.75%
<FN>
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+ Class B shareholders who hold their shares for an extended period of
time may pay more in Rule 12b-1 distribution fees than the economic
equivalent of the maximum front-end sales charges permitted under the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc. See "How to Buy Shares," below.
* The Manager has agreed to reduce its fees and absorb other operating
expenses to ensure that the operating expenses for each Fund (other
than interest, taxes, brokerage commissions and other portfolio
transaction expenses, capital expenditures and extraordinary expenses)
will not exceed 1.00% and 1.75% of the average net assets of each
Fund's Class A and Class B shares, respectively, on an annual basis
for the first twelve months of the Funds' operations. Absent expense
reimbursement, management fees would be 0.60% of average net assets,
actual "Other Estimated Expenses" for each Fund's Class A and Class B
shares for the fiscal year ended June 30, 1996, would be 1.75% and
1.75% of average net assets (annualized), respectively, and actual
"Total Estimated Fund Operating Expenses" for each Fund's Class A and
Class B shares for the fiscal year ended June 30, 1996, would be 2.60%
and 3.35% of average net assets (annualized), respectively.
</TABLE>
2
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EXAMPLE: Assume the annual return is 5% and operating expenses are the same as
those stated above. For every $1,000 you invest in a Fund, for example, here's
how much you would have paid in total expenses if you closed your account after
the number of years indicated:
<TABLE>
<CAPTION>
AFTER AFTER
1 3
YEAR YEARS
---- ----
<S> <C> <C>
Class A shares(1).............................................................. $ 55 $ 75
Class B shares
Assuming complete redemption at end of period(2)........................... $ 68 $ 85
Assuming no redemption..................................................... $ 18 $ 55
<FN>
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1. Assumes deduction at time of purchase of maximum applicable front-end sales
charge.
2. Assumes deduction at time of redemption of maximum applicable contingent
deferred sales charge.
Note: The preceding example should not be considered representative of future
investment returns and operating expenses. The Funds are new and the above
figures are based on estimated expenses for the first twelve months of Fund
operations only. Actual investment returns and operating expenses may be more or
less than those shown.
</TABLE>
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This expense information is provided to help you understand the expenses you
would bear either directly (as with transaction expenses) or indirectly (as with
annual operating expenses) as a Fund shareholder.
The Funds pay a management fee at the annual rate of 0.60% of a Fund's average
daily net assets.
A distribution plan payment is made in the amount of 0.75% of the average daily
net assets of a Fund's Class B shares. A shareholder service payment is made in
the amount of 0.25% of the average daily net assets of a Fund's Class A and
Class B shares. For a further description of shareholder transaction expenses
and each Fund's operating expenses, see the sections entitled "Shareholder
Guide," "The Business of the Funds" and "Plan Payments," below.
The alternative sales arrangements permit an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase, the
length of time the investor expects to hold the shares and other circumstances.
Investors should determine whether under their particular circumstances it is
more advantageous to incur an initial sales charge, or to have the entire
initial purchase price invested in a Fund with the investment thereafter being
subject to an annual distribution plan charge and a contingent deferred sales
charge. See the section entitled "How to Buy Shares," below.
3
<PAGE> 5
FINANCIAL HIGHLIGHTS
The table below shows certain information concerning the investment results for
the Funds for the period indicated.
The Financial Highlights should be read in conjunction with the financial
statements and notes thereto in the Statement of Additional Information. The
Statement of Additional Information may be obtained from the Funds free of
charge by calling (800) 247-9728.
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
---------------------------- ---------------------------- ----------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------------ ------------ ------------ ------------ ------------ ------------
SEPTEMBER 5, SEPTEMBER 5, SEPTEMBER 5, SEPTEMBER 5, SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO 1995 TO 1995 TO 1995 TO 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995(A) 1995(A) 1995(A) 1995(A) 1995(A) 1995(A)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $10.04(d) $10.04(d) $10.04(d) $10.04(d) $10.04(d) $10.04(d)
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITIES:
Net investment income.......... 0.06 0.05 0.06 0.05 0.05 0.04
Net realized and unrealized
gains on investments......... 0.27 0.27 0.34 0.34 0.40 0.40
------------ ------------ ------------ ------------ ------------ ------------
0.33 0.32 0.40 0.39 0.45 0.44
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS:
Net investment income.......... (0.06) (0.05) (0.06) (0.05) (0.05) (0.04)
------------ ------------ ------------ ------------ ------------ ------------
Net Asset Value, End of Period... $10.31 $10.31 $10.38 $10.38 $10.44 $10.44
============= ============= ============= ============= ============= =============
Total Return (excludes sales and
redemption charges)(b)......... 3.27% 3.19% 3.97% 3.78% 4.36% 4.38%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)........................ $2,712 $6,945 $2,702 $4,823 $2,041 $4,400
Ratio of expenses to average
net assets(c)................ 0.02% 0.72% 0.02% 0.68% 0.02% 0.74%
Ratio of net investment income
to average net assets(c)..... 4.54% 3.87% 4.16% 3.55% 4.04% 3.37%
Ratios Without Reimbursement:*
Ratio of expenses to average
net assets(c)*............... 2.98% 3.72% 3.35% 4.10% 3.04% 3.78%
Ratio of net investment income
to average net assets(c)*.... 1.58% 0.87% 0.83% 0.13% 1.02% 0.33%
Portfolio turnover**........... 85.33% 85.33% 59.79% 59.79% 33.02% 33.02%
<FN>
-----------------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratio 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 26, 1995 (initial seed date) through September 4,
1995.
</TABLE>
4
<PAGE> 6
FUND INVESTMENTS
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INVESTMENT OBJECTIVES
THE INVESTMENT OBJECTIVE OF THE TIME HORIZON FUNDS 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. TOTAL RETURN IS DEFINED AS THE CHANGE IN VALUE OF AN INVESTMENT IN
A FUND OVER THE STATED TIME PERIOD, ASSUMING THAT ALL DIVIDENDS AND CAPITAL
GAINS DISTRIBUTIONS MADE BY THE FUND DURING THE PERIOD ARE REINVESTED IN
ADDITIONAL FUND SHARES. EACH FUND SEEKS TO ACHIEVE ITS OBJECTIVE THROUGH AN
ASSET ALLOCATION STRATEGY PRINCIPALLY USING EQUITY SECURITIES AND FIXED INCOME
SECURITIES.
TIME HORIZON PORTFOLIO 1 IS MANAGED FOR INDIVIDUALS INVESTING FOR A FINANCIAL
GOAL EXPECTED TO OCCUR AROUND THE YEAR 2005.
TIME HORIZON PORTFOLIO 2 IS MANAGED FOR INDIVIDUALS INVESTING FOR A FINANCIAL
GOAL EXPECTED TO OCCUR AROUND THE YEAR 2015.
TIME HORIZON PORTFOLIO 3 IS MANAGED FOR INDIVIDUALS INVESTING FOR A FINANCIAL
GOAL EXPECTED TO OCCUR AROUND THE YEAR 2025.
THE TARGET TIME HORIZON DATES ARE NOT MATURITY DATES, BUT ESTIMATED DATES AT
WHICH THE FUNDS WILL BE MANAGED WITH A PREDOMINANT EMPHASIS ON CAPITAL
PRESERVATION, AS DESCRIBED UNDER "UPON REACHING THE TIME HORIZON," BELOW. THE
FUNDS DO NOT HAVE A PLANNED TERMINATION VALUE, AND AN INVESTOR'S SHARES, AT A
FUND'S TARGET TIME HORIZON, MAY BE WORTH MORE OR LESS THAN THE INVESTOR'S
ORIGINAL INVESTMENT. AS WITH ANY OPEN-END INVESTMENT MANAGEMENT COMPANY,
INVESTORS MAY REDEEM THEIR SHARES AT ANY TIME, AS DESCRIBED UNDER "HOW TO SELL
SHARES," BELOW.
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ASSET ALLOCATION
Each Time Horizon Fund has a strategic mix of its investments allocated
principally to two asset classes: equity securities and fixed income securities.
The strategic asset allocation mix for each Fund varies over time as the Fund
moves closer to its target time horizon. Typically, the more distant a Fund's
target time horizon, the greater the allocation to assets with higher growth
potential and more risk, such as equity securities. Conversely, the closer a
Fund's target time horizon, the greater the emphasis on capital preservation
assets such as short-term fixed income securities. Each Time Horizon Fund will
be managed more conservatively as it moves closer to its stated target time
horizon, with the goal of reducing risk as measured by the probability of loss
in a given year. Thus, assuming static market conditions, ten years from now the
asset allocation mix of Portfolio 2 could be expected to look like the current
asset allocation mix of Portfolio 1.
Under normal market conditions, Bank of America currently actively manages each
Fund's strategic asset allocation mix within the ranges shown below, based on an
evaluation of the anticipated returns and risks for various asset classes in the
near-term future. For example, if stocks are considered to have a greater
appreciation potential relative to bonds during a given period, each Fund's
percentage weighting of stocks may be increased within the ranges indicated
below. Allocating assets within the specified ranges permits each Fund to
attempt to optimize performance consistent with its investment objective and
time horizon.
5
<PAGE> 7
CURRENT ASSET ALLOCATION:
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
------------------------ ------------------------ ------------------------
STRATEGIC STRATEGIC STRATEGIC
ALLOCATION RANGE ALLOCATION RANGE ALLOCATION RANGE
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Equity Securities............... 35% 15%-45% 50% 30%-70% 70% 40%-100%
Fixed Income Securities......... 65% 55%-85% 50% 30%-70% 30% 0%-60%
</TABLE>
From time to time, each Fund may also utilize certain other instruments that do
not fall within the asset classes listed above, including options, futures
contracts, and repurchase agreements, as described below under "Types of
Investments" and "Other Investment Practices and Considerations." Under normal
market conditions, no more than 10% of a Fund's total assets will be invested in
such instruments.
Until a Fund attains an asset level of approximately $15 million, the Manager
anticipates that the Fund's portfolio may be invested in fewer securities within
each strategically allocated asset class, as indicated above, than it otherwise
would. As each Fund approaches this minimum asset level, the Manager expects to
acquire additional securities within the asset classes, and thereby achieve the
desired diversification level over time.
UPON REACHING THE TIME HORIZON
It is anticipated that after reaching their respective target time horizons,
having shifted their emphases from total return, the Funds will continue to be
managed with a predominant emphasis on preservation of capital. Upon reaching
the specific Fund's time horizon, investors should consider whether the Fund
continues to meet their objectives. After a Fund has reached its target time
horizon, its assets may begin to decrease as a result of investor withdrawals,
in which event the Board of Trustees of the Company will monitor withdrawals and
consider what action would be appropriate to protect the interests of all its
shareholders. Such action could include a merger of the Fund with another fund
with similar investment objectives (i.e., capital preservation) or termination
of the Fund.
RISK FACTORS
The Funds' investment practices involve certain risks, including the market
risks inherent in equity investments and market and interest rate risks inherent
in fixed income investments, and may involve risks associated with investment in
foreign securities and the use of derivative securities such as options and
futures contracts. Such risks are described under "Types of Investments" and
"Other Investment Practices and Considerations," below. The Statement of
Additional Information contains more detailed information about these
investments and the risks that may be associated with them.
TYPES OF INVESTMENTS
IN GENERAL. Each Fund is a diversified portfolio which will invest
substantially all of its assets through an asset allocation approach using
equity and fixed income securities.
The Funds' investments in equity securities will be comprised of common and
preferred stocks, and securities convertible into such stocks, of domestic and
foreign companies with small, medium and large market capitalizations (public
market price times total outstanding shares). Historically, while equity
securities have experienced a higher level of volatility due to market
fluctuations than fixed income securities, they also have provided higher levels
of total return. In addition, investments in companies with smaller market
capitalizations involve greater risk than investments in larger, more
established companies, including more volatile market price movements.
Fixed income securities acquired by the Funds will be investment grade at the
time of purchase, and may include domestic and foreign corporate debt
obligations (including bonds, debentures,
6
<PAGE> 8
notes, and zero coupon securities), government debt obligations, and
mortgage-backed and asset-backed securities. The Funds are not restricted as to
the maturity or average maturity of their fixed income investments. If fixed
income securities purchased by the Funds subsequently fall below investment
grade, the Funds will seek to dispose of the securities in an orderly and
prudent manner, normally over a period of approximately 30 to 90 days.
Investment grade bonds are bonds that are rated in one of the four highest
rating categories by a nationally recognized statistical rating organization,
e.g., BBB or better by Standard & Poor's Corporation ("S&P"), Duff & Phelps
Credit Co. ("D&P") or Fitch Investors Service, Inc. ("Fitch") or Baa or better
by Moody's Investors Service, Inc. ("Moody's"). Investment grade debt securities
ordinarily carry lower rates of interest income than lower quality debt
securities with similar maturities. While bonds rated investment grade are
regarded as having adequate capacity to pay interest and repay principal,
adverse economic conditions, changing circumstances, or circumstances not known
or adequately taken into account by the rating agency could lead to a weakened
capacity to pay interest and repay principal. Bonds with the lowest investment
grade rating (i.e., BBB or Baa) do not have outstanding investment
characteristics and may have speculative characteristics as well. Unrated
securities will be purchased only if the Manager believes that they are of
comparable quality to the rated securities in which the Funds may invest.
Fixed income securities held by the Funds are subject to interest rate risk, as
the value of such securities will vary inversely with changes in interest rates.
Fixed income securities held by the Funds are also subject to market risk, as
the value of such securities will vary with a variety of market and economic
conditions.
U.S. GOVERNMENT OBLIGATIONS. Investments in U.S. Treasury securities are backed
by the "full faith and credit" of the U.S. Government. Such securities include
Treasury bills, Treasury notes and Treasury bonds. The Funds may also purchase
other obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Obligations of certain agencies and instrumentalities of the
U.S. Government, such as the Small Business Administration, are backed by the
full faith and credit of the U.S. Government; others, like the Federal National
Mortgage Association, are backed by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, including the
Student Loan Marketing Association, are backed solely by the issuer's credit.
There is no assurance that the U.S. Government would support a U.S. Government-
sponsored entity if it were not required to do so by law.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities, such as Government
National Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA"), and Federal Home Loan Mortgage Corporation ("FHLMC") securities,
consist of interests in pools of real estate mortgage loans, and will be
guaranteed as to principal and interest, but not market value, by the U.S.
Government or by one of its agencies or instrumentalities. A risk associated
with mortgage-backed securities is early paydown resulting from refinancing of
the underlying mortgages which is similar to the risk that corporate bonds might
be called by the issuer if the bond interest rate is higher than currently
prevailing interest rates. The rate of such prepayments, and hence the life of
the security, will be primarily a function of current market rates. In periods
of falling interest rates, the rate of prepayments tends to increase. During
such periods, the reinvestment of prepayment proceeds will generally be at lower
rates than the rates on the prepaid obligations.
ASSET-BACKED SECURITIES. Asset-backed securities consist of undivided
fractional interests in pools of mortgages, consumer loans or receivables held
in a trust. Examples include collateralized mortgage obligations ("CMOS"),
certificates for automobile receivables ("CARS") and credit card
7
<PAGE> 9
receivables ("CARDS"). Payments of principal and interest on the mortgages,
loans or receivables are passed through to certificate holders. Asset-backed
securities may be issued by either governmental or non-governmental entities.
Payment on asset-backed securities of private issuers is typically supported by
some form of credit enhancement, such as a letter of credit, surety bond,
limited guaranty, or subordination. The extent of credit enhancement varies, but
usually amounts to only a fraction of the asset-backed security's value.
Ultimately, asset-backed securities are dependent upon payment of the mortgages,
consumer loans or receivables by individuals, and the certificate holder
frequently has no recourse to the entity that originated the loans or
receivables. All asset-backed securities purchased by the Funds will either be
issued or guaranteed by a U.S. Government entity, rated AAA by S&P or Aaa by
Moody's, or have an equivalent rating from another rating agency.
The assets underlying asset-backed securities may be prepaid with the result of
shortening the certificates' weighted average life. Prepayment rates vary widely
and may be affected by changes in market interest rates. It is not possible to
accurately predict the average life of a particular pool of mortgages, loans or
receivables. The proceeds of prepayments received by a Fund must be reinvested
in securities whose yields reflect interest rates prevailing at the time. Thus,
a Fund's ability to maintain a portfolio which includes high-yielding
asset-backed securities will be adversely affected to the extent reinvestments
are in lower yielding securities. The actual maturity and realized yield will
therefore vary based upon the prepayment experience of the underlying asset pool
and prevailing interest rates at the time of prepayment. Also, while the
secondary market for certain asset-backed securities is ordinarily quite liquid,
in times of financial stress the secondary market may not be as liquid as the
market for other types of securities, which could make valuing or liquidating
such securities difficult.
CASH EQUIVALENTS. For temporary defensive purposes (for example, when Bank of
America believes such a position is warranted by uncertain or unusual market
conditions, or when liquidity is required to meet unusually high redemption
requests), the Funds may invest without limitation in cash equivalents such as
money market instruments (including short-term bank time deposits, certificates
of deposit, bankers' acceptances, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and commercial paper issued by
U.S. and foreign issuers which is rated at the time of purchase at least Prime-2
by Moody's or A-2 by S&P) and, subject to the investment limitations described
below, shares of other open-end investment companies which seek to maintain a
$1.00 net asset value per share ("Money Market Funds"). Under normal market
conditions, prior to reaching its time horizon date, no more than 10% of a
Fund's net assets will be invested in cash equivalents. After reaching its
stated time horizon, the percentage of each Fund's net assets invested in cash
equivalents may increase, consistent with its predominant emphasis on capital
preservation.
The Funds may also make other investments as described more fully below under
"Other Investment Practices and Considerations."
FUNDAMENTAL LIMITATIONS
The investment objective of a Fund may not be changed without a vote by the
holders of a majority of the outstanding shares of the Fund. Policies requiring
such a vote to effect a change are known as "fundamental." Included in the
Funds' fundamental policies is the restriction that no Fund may invest more than
10% of the value of its net assets in securities that at the time of purchase
have legal or contractual restrictions on resale or are otherwise illiquid. The
Manager will monitor the amount of illiquid securities in the Funds' portfolios,
under the supervision of the Board of Trustees, to ensure compliance with the
Funds' investment restrictions. A complete list of the Funds' fundamental
investment limitations is
8
<PAGE> 10
set out in the Statement of Additional Information.
OTHER INVESTMENT PRACTICES AND CONSIDERATIONS
FOREIGN SECURITIES. Subject to its investment objective and policies stated
above, each Fund may invest in debt and equity securities of foreign issuers
that may or may not be publicly traded in the United States. Such securities may
include, subject to the further investment limitations stated under "Investment
Company Securities," below, shares of open-end investment companies that invest
primarily in securities of foreign issuers. It is currently the intention of
each Fund to invest no more than 20% of its total assets at the time of purchase
in securities of foreign issuers, of which up to 10% of such total assets may be
invested in debt obligations of foreign issuers. Foreign debt securities may
include Yankee bonds (dollar-denominated bonds sold in the United States by
non-U.S. issuers) and Eurobonds (bonds issued in a country and sometimes a
currency other than the country of the issuer). A Fund's investment limitations
regarding its investments in foreign securities also apply to investments in
dollar-denominated American Depositary Receipts ("ADRs") traded in the United
States on exchanges or in the over-the-counter markets. ADRs are
dollar-denominated receipts for the shares of a foreign-based corporation held
by a U.S. bank and traded in U.S. markets. ADRs may be sponsored by the foreign
issuer or may be unsponsored. Unsponsored ADRs are organized independently and
without the cooperation of the foreign issuer of the underlying securities; as a
result, available information regarding the issuer may not be as current as for
sponsored ADRs, and the prices of unsponsored ADRs may be more volatile than if
they were sponsored by the issuers of the underlying securities. The Funds may
be subjected to additional risks associated with the holding of property abroad
such as future political and economic developments, currency fluctuations,
possible withholding of tax payments, possible seizure or nationalization of
foreign assets, possible establishment of currency exchange control regulations
or the adoption of other foreign government restrictions that might adversely
affect the payment of principal or interest on foreign securities in the Funds.
Securities of some foreign companies are less liquid, and their prices more
volatile, than those of domestic companies. There is less publicly available
information about foreign companies than domestic companies, and foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies.
CONVERTIBLE SECURITIES. The convertible securities in which the Funds may
invest include convertible preferred stocks, convertible debentures and warrants
which may be exchanged for, converted into, or exercised to acquire a
predetermined number of shares of the issuer's common stock at the option of the
holder during a specified time period. Convertible securities generally pay
interest or dividends and provide for participation in the appreciation of the
underlying common stock but generally have a lower level of risk because the
yield is higher and the security is senior to common stock. Convertible
securities may also include warrants which give the holder the right to purchase
at any time during a specified period a predetermined number of shares of common
stock at a fixed price but which do not pay a fixed dividend. Investments in
warrants involve certain risks, including the possible lack of a liquid market
for resale and the failure of the price of the underlying security to reach or
have reasonable prospects of reaching a level at which the warrant can be
prudently exercised.
OPTIONS. Each of the Funds may purchase put and call options on listed
securities and stock indexes so long as the aggregate premiums paid for options
does not exceed 2% of the net assets of the Fund (this restriction does not
apply to options on futures contracts). Put options may be purchased in order to
protect the Fund's portfolio securities in expectation of a declining market,
and call options may be purchased to
9
<PAGE> 11
benefit from anticipated price increases in the underlying securities or index.
A Fund may not write put options but may write fully covered call options in
order to realize current income from the premiums received as long as the Fund
remains fully covered throughout the life of the option, either by owning the
optioned securities or possessing a call issued by another writer that is
identical in all respects to the call written by the Fund.
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. Although the Fund's risk when purchasing options is
limited to the amount of the original premiums paid plus transaction costs,
options may be more volatile than the underlying instruments, and therefore, on
a percentage basis, an investment in options may be subject to greater
fluctuation than an investment in the underlying instruments themselves. When
writing covered call options, the Fund gives up the opportunity to profit from a
price increase in the underlying security above the option's exercise price in
return for the premium, but retains the risk of loss should the price of the
underlying security fall. In addition, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives, and there is no guarantee that a liquid secondary market for
particular options will exist. For additional information relating to options
transactions and the particular risks thereof, please refer to the Statement of
Additional Information.
FUTURES. The Funds may purchase and sell futures contracts (and may purchase
related options) on domestic and foreign stock indexes, interest rates, bonds
and currencies as a hedge against anticipated interest rate fluctuations or
changes resulting from market conditions in the values of the securities that a
Fund holds in its portfolio or intends to purchase or sell, and where the
transactions are economically appropriate for the reduction of risks inherent in
the ongoing management of the Fund's portfolio. In addition, the Funds may
purchase and sell futures contracts on interest rates, bonds and stock indexes,
such as U.S. Treasury bonds or the S&P 500 Index, as a substitute for purchasing
or selling the underlying securities. The Fund may not purchase or sell a
futures contract or purchase a related option unless, immediately after any such
transaction, the sum of the aggregate amount of initial margin deposits on its
existing futures positions and the amount of premiums paid for related options
is 5% or less of its total assets (after taking into account certain technical
adjustments).
The Funds may be subject to additional risks associated with futures contracts,
such as the possibility that the Manager's forecasts of market values and other
factors are not correct, imperfect correlation between a Fund's hedging
instrument and the asset or liability being hedged, default by the other party
to the transaction, and inability to close out a position because of the lack of
a liquid market. In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in a futures contract
and the securities being hedged, the price of futures contracts may not
correlate perfectly with movement in the cash market due to certain market
distortions. As a result of these factors, a correct forecast of general market
trends or interest rate movements by the Manager may still not result in a
successful hedging transaction over a short time frame. More information
regarding futures contracts and related options, including the costs and risks
related to such instruments, is included in the Statement of Additional
Information.
The transactions described in "Options" and "Futures," above, are frequently
referred to as derivative transactions. In general, derivatives are instruments
whose value is based upon, or derived from, some underlying index, reference
rate (e.g., interest rates or currency exchange rates), security, commodity or
other asset.
VARIABLE RATE INSTRUMENTS. The Funds may invest in variable and floating rate
instruments, which may include master demand notes.
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<PAGE> 12
Although payable on demand by a Fund, master demand notes may not be marketable.
Consequently, the ability to redeem such notes may depend on the borrower's
ability to pay, which will be monitored by the Manager. Such notes will be
purchased only from domestic corporations that either (a) are rated Aa or better
by Moody's or AA or better by S&P, (b) have commercial paper rated at least
Prime-2 by Moody's or A-2 by S&P, (c) are backed by a bank letter of credit or
(d) are unrated and are determined by the Manager to be of a quality comparable
to securities described in either clause (a) or (b).
INVESTMENT COMPANY SECURITIES. As described under "Cash Equivalents," above,
the Funds may invest in securities of Money Market Funds as a temporary
defensive measure, when market conditions are uncertain or unusual, or for other
purposes. The Funds may also invest in securities issued by other open-end
investment companies, including those which invest in foreign securities of the
type in which the Funds are authorized to invest. No more than 10% of the value
of a Fund's total assets will be invested in securities of other investment
companies, with no more than 5% invested in the securities of any one investment
company. In addition, a Fund may hold no more than 3% of the outstanding voting
stock of any other investment company. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the other investment company's expenses, including advisory fees; however,
Bank of America will reduce its advisory fees by the amount of any advisory fees
of such other investment company borne by the Funds.
The Company reserves the right to apply to the Securities and Exchange
Commission for an exemption from certain other provisions of the 1940 Act, which
limit each Fund's investment in investment companies to the percentages of its
total assets indicated above. If an exemption is applied for and granted, each
Fund may not be limited as to the amount of its total assets that may be
invested in securities of other investment companies managed by the Manager.
Prior to any such investment, the Funds' shareholders will be asked to approve
the other funds, this Prospectus will be amended to describe the other funds,
and all operating expenses of the Funds will be paid by the Manager.
REPURCHASE AGREEMENTS. The Funds may buy securities subject to the seller's
agreement to repurchase them at an agreed upon time and price. These
transactions are known as repurchase agreements. The Funds will enter into
repurchase agreements only with banks which have a commercial paper rating of
A-2 or better by S&P or Prime-2 or better by Moody's or registered
broker-dealers deemed creditworthy by the Manager, under guidelines approved by
the Company's Board of Trustees. A Fund's investments in repurchase agreements
with maturities greater than seven days, together with all other illiquid
securities, will not exceed 10% of the value of its net assets.
During the term of any repurchase agreement, the seller must maintain the value
(including accrued interest) of the securities subject to the agreement in an
amount that is greater than the repurchase price. The Manager monitors that
value to make sure that it is maintained. Nonetheless, should the seller default
on its obligations under the agreement, the Fund would be exposed to possible
loss due to adverse market action or delays connected with the disposition of
the underlying obligations.
REVERSE REPURCHASE AGREEMENTS. The Funds may borrow money for temporary
purposes by entering into transactions called reverse repurchase agreements.
Under these agreements, the Funds sell portfolio securities to financial
institutions and agree to buy them back later at an agreed upon time and price.
The Funds will conduct reverse repurchase transactions only with banks which
have a commercial paper rating of A-2 or better by S&P or Prime-2 or better by
Moody's or registered broker-dealers deemed creditworthy by the Manager, under
guidelines approved by the Company's Board of Trustees.
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<PAGE> 13
When a Fund enters into a reverse repurchase agreement, it places in a separate
custodial account either liquid assets or other high-grade debt securities which
have a value equal to or greater than the repurchase price. The account is
monitored by the Manager to make sure that an appropriate value is maintained.
Reverse repurchase agreements involve the risk that the value of portfolio
securities a Fund relinquishes may decline below the price the Fund must pay
when the transaction closes. The Funds will only enter into reverse repurchase
agreements to avoid the need to sell portfolio securities to meet redemption
requests.
SECURITIES LENDING. In order to earn additional income, the Funds may lend
portfolio securities to broker-dealers that the Manager considers to be of good
standing. Borrowers of portfolio securities may not be affiliated directly or
indirectly with the Company. If the broker-dealer should become bankrupt,
however, a Fund could experience delays in recovering its securities. A
securities loan will only be made when, in the Manager's judgment, the possible
reward from the loan justifies the possible risks. In addition, such loans will
not be made if, as a result, the value of securities loaned by a Fund exceeds
10% of its total assets. Securities loans will be fully collateralized.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The Funds may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. These transactions, which involve a commitment by a
Fund to purchase or sell particular securities with payment and delivery taking
place at a future date (perhaps one or two months later), permit a Fund to
lock-in a price or yield on a security, regardless of future changes in interest
rates. When-issued and forward commitment transactions involve the risk that the
price or yield obtained may be less favorable than the price or yield available
when the delivery takes place. A Fund will set aside in a segregated account
cash or liquid securities equal to the amount of any when-issued or forward
commitment purchases. A Fund's when-issued purchases and forward commitments may
not exceed 25% of the value of the Fund's total assets absent unusual market
conditions. The Funds do not intend to engage in when-issued purchases and
forward commitments for speculative purposes but only in furtherance of their
investment objectives.
SECURITIES ISSUED BY BANK OF AMERICA AND AFFILIATES. The Funds will not invest
in instruments or securities issued by Bank of America or any of its affiliates.
FUND TRANSACTIONS. Other investment companies and accounts managed by the
Manager and its affiliated entities may also invest in the same securities as
the Funds. When a purchase or sale of the same security is made at substantially
the same time on behalf of a Fund and another investment company or account,
available investments or opportunities for sales will be equitably allocated
pursuant to procedures of Bank of America. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained or sold by a Fund.
From time to time, the Funds may pay brokerage commissions to an affiliate of
the Funds' distributor, Concord Financial Group, Inc. (the "Distributor"), on
securities acquired by a Fund. In allocating the purchase and sale orders for
investment securities involving the payment of brokerage commissions or dealer
concessions, the Manager may consider the sale of Fund shares by broker-dealers
and other financial institutions (including affiliates of the Manager and the
Funds' distributor to the extent permitted by law), provided it believes the
quality of the transaction and the price to a Fund are not less favorable than
what they would be with any other qualified firm.
PORTFOLIO TURNOVER. The Funds' investment practices may result in portfolio
turnover greater than that of other mutual fund portfolios. Higher rates of
turnover may require payment of brokerage commissions, impose other transaction
costs
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<PAGE> 14
and could increase substantially the amount of income received by the Funds that
constitutes taxable capital gains. To the extent capital gains are realized,
distributions from those gains may be ordinary income for federal tax purposes
(see "Tax Information"). Although no commissions are paid on bond transactions,
purchases and sales are at net prices which reflect dealers' mark-ups and
mark-downs, and a higher portfolio turnover rate for bond investments will
result in the payment of more dealer mark-ups and markdowns than would otherwise
be the case. Each Fund's annual portfolio turnover rate is not expected to
exceed 150% for common stock investments and 100% for bond investments and its
composite annual portfolio turnover rate is not expected to exceed 125%.
Turnover will not be a limiting factor in making investment decisions for the
Funds.
SHAREHOLDER GUIDE
THE FOLLOWING SECTION WILL PROVIDE YOU WITH ANSWERS TO SOME OF THE MOST
OFTEN-ASKED QUESTIONS REGARDING BUYING AND SELLING A FUND'S SHARES AND
REGARDING A FUND'S DIVIDENDS.
HOW TO BUY SHARES
WHAT IS MY MINIMUM INVESTMENT IN A FUND?
Generally, there is a minimum investment requirement of $500 for initial
purchases and $50 for subsequent purchases, although these amounts may be
altered in certain circumstances as shown below and may be changed at anytime in
the sole discretion of the Funds.
INVESTMENT MINIMUMS
FOR SPECIFIC TYPES OF ACCOUNTS
<TABLE>
<CAPTION>
INITIAL SUBSEQUENT
INVESTMENT INVESTMENT
------- -------------
<S> <C> <C>
Regular Account $ 500* $50
Automatic Investment Plan $ 50 $50
IRAs, SEP-IRAs (one
participant) $ 500 No minimum
Spousal IRAs** $ 250 No minimum
SEP-IRAs (more than one
participant) $ 2,500 No minimum
<FN>
* The minimum investment is $100 for purchases made through Bank of America's
trust and agency accounts or a Service Organization (defined below) whose
clients have made aggregate minimum purchases of $1,000,000. For shares
purchased with a Bank AmeriChoice award certificate the minimum investment
is $200.
** A regular IRA must be opened in conjunction with this account.
</TABLE>
WHAT ALTERNATIVE SALES ARRANGEMENTS ARE AVAILABLE?
Each Fund issues two classes of shares. Class A shares are sold to investors
choosing the initial sales charge alternative, and Class B shares are sold to
investors choosing the deferred sales charge alternative. The two classes of
shares each represent interests in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects, except that Class
B shares bear the expenses of distribution plan fees and the deferred sales
charge arrangements and any expenses (which may include incremental transfer
agency costs) resulting from such arrangements, and have exclusive voting rights
with respect to the distribution plan. The two Classes also have different
exchange privileges, as described below.
The net income attributable to Class B shares and the dividends payable on Class
B shares will be reduced by the amount of the distribution plan fees
attributable to Class B shares and incremental expenses associated with such
plan. Sales personnel may receive different compensation for selling Class A and
Class B shares, and only Class A shares may be available for purchase through
certain securities dealers.
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<PAGE> 15
HOW ARE SHARES PRICED?
Shares are purchased at their public offering price, which is based upon a
Fund's net asset value per share, plus a front-end sales load on the Class A
shares. Each Fund calculates its net asset value ("NAV") as follows:
(Value of Fund Assets) - (Fund Liabilities)
NAV = ----------------------------------------------------
Number of Outstanding Shares
Net asset value is determined as of the end of regular trading hours on the New
York Stock Exchange (the "Exchange") (normally 4:00 p.m. Eastern time) on days
the Exchange is open.
A Fund's 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 relating to instruments or securities with similar characteristics.
Short-Term Securities are valued at amortized cost, which approximates market
value. Equity options are valued at the last sale price unless the bid price is
higher or the asked price is lower, in which event such bid or asked price is
used. Futures contracts and options thereon are valued at the settlement price
established each day by the board of trade or exchange on which they are traded.
Other securities and assets are valued at fair value as determined in good faith
pursuant to procedures adopted by the Board of Trustees. Trading in foreign
securities is generally completed prior to the end of regular trading on the
Exchange. Trading may occur in foreign securities, however, on Saturdays and
U.S. holidays and at other times when the Exchange is closed. As a result, there
may be delays in reflecting changes in the market values of foreign securities
in the calculation of the net asset value of a Fund. There may be variations in
the net asset value per share of a Fund on days when net asset value is not
calculated and on which shareholders of a Fund cannot redeem due to changes in
values of securities traded in foreign markets. For further information about
valuing securities, see the Statement of Additional Information. For voice
recorded price and yield information call (800) 247-9728.
CLASS A SHARES SALES LOAD. The front-end sales load for the Class A shares of
each Fund begins at 4.50% of the offering price and may decrease as the amount
you invest increases, as shown in the following chart:
<TABLE>
<CAPTION>
AS A % OF
-------------- DEALER'S
NET REALLOWANCE
OFFERING ASSET AS A
PRICE VALUE % OF
AMOUNT OF PER PER OFFERING
TRANSACTION SHARE SHARE PRICE*
------------------ ---- ---- ----
<S> <C> <C> <C>
Less than $100,000 4.50 4.71 4.00
$100,000 but less
than $250,000 3.75 3.90 3.35
$250,000 but less
than $500,000 2.50 2.56 2.20
$500,000 but less
than $750,000 2.00 2.04 1.75
$750,000 but less
than $3,000,000 1.00 1.01 0.90
$3,000,000 or more 0.00 0.00 0.00
<FN>
* Dealer's reallowance may be changed periodically.
From time to time, the Funds' Distributor may make or allow additional
payments or promotional incentives in the form of cash or other compensation
such as trips to sales seminars, tickets to sporting and other entertainment
events and gifts of merchandise to firms that sell shares of the Funds.
</TABLE>
CLASS B SHARES DEFERRED SALES CHARGE. Investors choosing the deferred sales
charge alternative purchase Class B shares at net asset value per share without
the imposition of a sales charge at the time of purchase. The Funds'
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<PAGE> 16
Distributor compensates broker-dealers that have entered into a selling
agreement with the Distributor from its own funds at the time the shares are
purchased. The proceeds of the contingent deferred sales charge and the ongoing
distribution plan fees described below are used to reimburse the Distributor for
its expenses, including compensation of broker-dealers.
Class B shares that are redeemed within 6 years of purchase are subject to the
contingent deferred sales charge at the rates set forth below, charged as a
percentage of the lesser of the current market value or the cost of the shares
being redeemed. Accordingly, no sales charge will be imposed on increases in net
asset value above the initial purchase price. In addition, no charge will be
assessed on shares derived from reinvestment of dividends or capital gains
distributions. 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.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEARS ELAPSED SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
------------------- -------------------------
<S> <C>
Less than one 5.0%
More than one, but
less than two 4.0%
More than two, but
less than three 3.0%
More than three,
but less than
four 3.0%
More than four, but
less than five 2.0%
More than five, but
less than six 1.0%
After six years None
</TABLE>
In determining whether a contingent deferred sales charge is applicable to a
redemption of Class B shares, the calculation will be made in a manner that
results in the lowest possible rate. It will be assumed that the redemption is
made first of amounts representing Class B shares acquired pursuant to the
reinvestment of dividends and distributions; then of amounts representing the
increase in net asset value of your holdings of Class B shares above the total
amount of payments for the purchase of Class B shares during the preceding 6
years; then of amounts representing the cost of Class B shares held beyond the
applicable contingent deferred sales charge period; and finally, of amounts
representing the cost of the Class B shares held for the longest period of time.
As an example, assume that you purchased 100 shares at $10 per share (at a cost
of $1,000), that in the third year after purchase the net asset value per share
is $12, and that during the three-year period you had acquired 10 additional
shares through dividend reinvestment. If at such time you make your first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to the
charge because of dividend reinvestment. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.00% (the applicable rate in
the third year after purchase).
WHEN NO SALES LOAD IS APPLIED. You pay no front-end sales load on the
following types of transactions:
- - reinvestment of dividends or distributions;
- - exchanges from Class A shares of another Time Horizon Fund or any Class A
shares offered by Pacific Horizon Funds, Inc. ("Pacific Horizon Funds");
- - employer-sponsored employee pension or retirement plans making direct
investments in a Fund;
- - any purchase of shares by an investment adviser regulated by federal or state
governmental authority when the investment adviser is purchasing shares for
its own account or for an account for which it is authorized to make
investment decisions (i.e., a discretionary account);
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<PAGE> 17
- - any purchase of shares made with proceeds from the redemption of another
open-end investment company on which you paid a front-end sales charge where
(i) the proceeds are invested into a Bank of America IRA account;
(ii) such redemption occurred within thirty (30) days prior to the date of the
purchase order; and (iii) such other investment company is distributed and
advised by entities other than the Distributor and Bank of America,
respectively, or their affiliates. You must notify the Company and/or
Transfer Agent at the time you place such purchase order of your eligibility
for the waiver of front-end sales charges and provide satisfactory evidence
thereof (e.g. a confirmation of redemption);
- - accounts that are opened for shareholders where the initial amount invested
represents redemption proceeds from a terminated thrift plan that has made
arrangements with the Funds' Distributor for such treatment, and subsequent
investments into such accounts, provided that: (i) the initial purchase of
shares of the Fund is made within 60 days of the redemption from the thrift
plan, and (ii) sufficient documentation as the Funds' Distributor may require
is provided at the time such Fund shares are purchased;
- - accounts opened by a bank, trust company or thrift institution, acting as a
fiduciary, provided appropriate notification of such status is given at the
time of investment;
- - any purchase of shares by clients of The Private Bank of Bank of America
Illinois or by Private Banking clients of Seattle-First National Bank or by or
on behalf of agency accounts administered by any bank or trust company
affiliate of Bank of America;
- - holders of the Bank Americard with an appropriate award certificate with the
Bank AmeriChoice Program;
- - any purchase of shares pursuant to the Reinstatement Privilege described
below; and
- - any purchase of shares pursuant to the Directed Distribution Plan described
below.
Additionally, the following individuals are not required to pay a front-end
sales load when purchasing Fund shares:
- - Members of the Company's Board of Trustees;
- - U.S.-based employees and retirees (including employees who are U.S. citizens
but work abroad and retirees who are U.S. citizens but worked abroad) of Bank
of America or any of its affiliates, and their spouses, minor children,
grandchildren and parents, as well as members of the Board of Directors of
Bank of America or any of its affiliates; and
- - registered representatives or full-time employees of broker-dealers having
agreements with the Funds' Distributor pertaining to the sale of Fund shares
(and their spouses and minor children) to the extent permitted by such
organizations.
WHEN NO CONTINGENT DEFERRED SALES CHARGE IS APPLIED. To receive one of the
first three exemptions listed below, you must explain the status of your
redemption at the time you redeem your shares. The contingent deferred sales
charge with respect to Class B Shares is not charged on (1) exchanges described
under "Shareholder Services -- Can I Exchange My Investment From One Fund to
Another?"; (2) redemptions in connection with minimum required distributions
from IRA, 403(b)(7) and Qualified Plan accounts due to the shareholder's
reaching age 70 1/2; (3) redemptions in connection with a shareholder's death or
disability (as defined in the Internal Revenue Code); and (4) involuntary
redemptions as a result of an account's net asset value remaining below $500
after 60 days written notice. In addition, no contingent deferred sales charge
is charged on shares acquired through the reinvestment of dividends or
distributions.
RIGHTS OF ACCUMULATION. When buying Class A shares in the Time Horizon Funds,
your current aggregate investment determines the sales load that you pay. Your
current aggregate investment is the accumulated combination of your immediate
investment along with the value of Class A
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<PAGE> 18
shares that you beneficially own in any other Time Horizon Fund on which you
paid a sales load (including shares that carry no sales load but were obtained
through an exchange and can be traced back to shares that were acquired with a
sales load). There is no specified time limit within which purchases must be
made to qualify for rights of accumulation.
To qualify for a reduced sales load on Class A shares, you or your Service
Organization (which is an institution such as a bank or broker-dealer that has
entered into a selling and/or servicing agreement with the Funds' Distributor)
must notify the Funds' transfer agent, BISYS Fund Services Ohio, Inc. (the
"Transfer Agent"), at the time of investment that a quantity discount is
applicable. Use of this service is subject to a check of appropriate records,
after which you will receive the lowest applicable sales charge. If you want to
participate you can so indicate on your Account Application or make a subsequent
written request to the Transfer Agent.
Example: Suppose you beneficially own Class A shares of Portfolio 3 that can be
traced back to the purchase of shares carrying a sales load (or any combination
thereof) with an aggregate current value of $90,000. If you subsequently
purchase additional Class A shares of Portfolio 2 with a current value of
$10,000, the load applicable to the subsequent purchase would be reduced to
3.75% of the offering price.
LETTER OF INTENT. You may also obtain a reduced sales charge on Class A
shares by means of a written Letter of Intent, which expresses your non-binding
commitment to invest in the aggregate a gross amount of $100,000 or more within
a period of 13 months, beginning up to 90 days prior to the date of the Letter's
execution. Class A shares of Time Horizon Funds purchased during that period
count as a credit toward completion of the Letter of Intent. Any investments you
make during the period receive the discounted sales load based on the full
amount of your investment commitment. When your commitment is fulfilled, an
adjustment will be made to reflect any reduced sales load applicable to shares
purchased during the 90-day period prior to the submission of your Letter of
Intent.
While signing a Letter of Intent does not bind you to purchase, or the Company
to sell, the full amount indicated at the sales load in effect at the time of
signing, you must complete the intended purchase to obtain the reduced sales
load. When you sign a Letter of Intent, the Company holds in escrow shares
purchased by you in an amount equal to 5% of the total amount of your
commitment. After you fulfill the terms of the Letter of Intent, the escrow will
be released.
If your aggregate investment exceeds the amount indicated in your Letter of
Intent, you will receive an adjustment which reflects the further reduced sales
load applicable to your excess investment. It will be in the form of additional
shares credited to your account at the then current offering price applicable to
a single purchase of the total amount of the total purchase.
If your aggregate investment is less than the amount you committed, you will be
requested to remit an amount equal to the difference between the sales load
actually paid and the sales load applicable to the aggregate purchases actually
made. If such remittance is not received within 20 days, the Transfer Agent will
redeem an appropriate number of shares held in escrow to realize the difference.
If you would like to participate, complete the Letter of Intent on your Account
Application. Please read it carefully, as you will be bound by its terms. If you
have any questions regarding the Letter of Intent, call (800) 247-9728.
HOW DO I DECIDE WHICH CLASS TO BUY?
The alternative sales arrangements of the Funds permit investors to choose the
method of purchasing shares that is most beneficial given the amount of their
purchase, the length of time they expect to hold the shares and other relevant
circumstances. Investors should determine whether under their particular
circumstances it is
17
<PAGE> 19
more advantageous to incur an initial sales charge and an ongoing shareholder
service plan fee, as discussed below, or to have the entire initial purchase
price invested in a Fund with the investment thereafter being subject to a
contingent deferred sales charge and ongoing shareholder service plan and
distribution fees.
As an illustration, investors who qualify for a significantly reduced sales
load, as described above, might elect the initial sales charge alternative
(Class A shares) because similar sales charge reductions are not available for
purchases under the deferred sales charge alternative (Class B shares).
Moreover, Class A shares would not be subject to an ongoing distribution plan
fee, as described below. However, because initial sales charges are deducted at
the time of purchase, such investors would not have all their funds invested
initially.
Investors not qualifying for a reduced initial sales charge who expect to
maintain their investment for an extended period of time might also elect the
initial sales charge alternative because over time the accumulated continuing
shareholder service and distribution fees related to Class B shares may exceed
the initial sales charge and ongoing shareholder service fees related to Class A
shares. However, such investors must weigh this consideration against the fact
that not all their funds will be invested initially. Furthermore, the ongoing
shareholder service and distribution fees will be offset to the extent any
return is realized on the additional funds initially invested under the deferred
sales charge alternative.
Certain other investors might determine it to be more advantageous to have all
their funds invested initially, although subject to continuing shareholder
service plan and distribution plan fees, and to a contingent deferred sales
charge for a 6-year period of time.
HOW CAN I BUY SHARES?
The chart below provides more information regarding some of the different
methods for investing in the Funds.
18
<PAGE> 20
<TABLE>
<S> <C> <C> <C>
TO BUY SHARES
- --------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- --------------------------------------------------------------------------------------------------------
THROUGH BANK OF AMERICA, YOUR BROKER OR ANOTHER SERVICE ORGANIZATION
(ORDERS ARE NOT EFFECTIVE UNTIL RECEIVED BY THE FUND'S TRANSFER AGENT)
Contact them directly for Contact them directly for
instructions instructions
- --------------------------------------------------------------------------------------------------------
THROUGH THE DISTRIBUTOR
(IF YOU ARE OR WILL BE THE SHAREHOLDER OF RECORD ON THE FUND'S BOOKS)
BY MAIL
Complete Account Application Mail all subsequent
and mail it with a check investments to:
(payable to the Time Horizon
Funds, Portfolio selected) to Time Horizon Funds,
the address on the File No. 54614
application. Los Angeles, CA 90074-4614
- --------------------------------------------------------------------------------------------------------
IN PERSON
Time Horizon Funds Deliver Account Application Deliver your payment directly
BISYS Fund Services Ohio, Inc. and your payment directly to to the address on the left.
3435 Stelzer Road the address on the left.
Columbus, Ohio 43219
- --------------------------------------------------------------------------------------------------------
BY WIRE
PNC Bank, NA A wire may not be used to Contact the Fund's Transfer
make an initial purchase. Agent at (800) 247-9728 for
wiring instructions.
Instruct your bank to
transmit immediately
available funds for purchase
of particular Fund shares in
your name. Indicate that you
are making a subsequent
purchase. Be sure to include
your Fund account number.
Consult your bank for information on remitting funds by wire
and any associated bank charges.
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C> <C> <C>
TO BUY SHARES
- --------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- --------------------------------------------------------------------------------------------------------
BY TELETRADE TeleTrade Privileges may not You may place purchase orders
(a service permitting transfers be used to make an initial by telephone in the minimum
of money from your purchase. amount of $500 and the
checking, NOW or bank maximum amount of $50,000 per
money market account) transaction as soon as
appropriate information
regarding your bank account
has been established on your
Fund account. This
information may be provided
on the Account Application or
in a signature guaranteed
letter of instruction to the
Transfer Agent. Signature
guarantees are discussed
under "How to Sell Shares,"
below.
Call (800) 247-9728 to make
your purchase.
You should refer to the "Shareholder Services" section
below for additional important information about the TeleTrade Privilege.
YOU MAY USE OTHER INVESTMENT OPTIONS, INCLUDING AUTOMATIC INVESTMENTS
AND EXCHANGES, TO INVEST IN YOUR FUND ACCOUNT.
PLEASE REFER TO THE SECTION ENTITLED "SHAREHOLDER SERVICES" FOR MORE INFORMATION.
</TABLE>
WHAT PRICE WILL I RECEIVE WHEN I BUY SHARES?
Your shares will be purchased at the particular Fund's public offering price
calculated at the next close of regular trading on the Exchange (normally 4:00
p.m. Eastern time) after your purchase order is received in proper form by the
Funds' Transfer Agent, BISYS Fund Services Ohio, Inc., at its Columbus office.
If you purchase shares through Bank of America, your broker or another Service
Organization, the entity involved is responsible for transmitting your order and
required funds to the Transfer Agent on a timely basis in accordance with the
procedures in this Prospectus. Share purchases (and redemptions) executed
through Bank of America or a Service Organization are executed only on days on
which the particular institution and the Funds are open for business. Purchase
orders received by a Service Organization in proper form by 4:00 p.m. Eastern
time on a business day will be effected at the public offering price calculated
at 4:00 p.m. Eastern time on that day, if the Service Organization transmits
your order to the Transfer Agent by the end of its business day. Except as
provided in the following two sentences, if the order is not received in proper
form by a Service Organization by 4:00 p.m. Eastern time or not received by the
Transfer Agent by the close of its business day, the order will be based upon
the next determined purchase price. The Company may from time to time in its
sole discretion appoint one or more entities as the Funds' agent to receive
irrevocable purchase and redemption orders and
20
<PAGE> 22
to transmit them on a net basis to the Transfer Agent. In these instances orders
received by the entity by 4:00 p.m. Eastern time on a business day will be
effected as of 4:00 p.m. Eastern time that day if the order is actually received
by the Transfer Agent not later than the next business morning accompanied by
payment in federal funds.
Please refer to "What is TeleTrade?" under "Shareholder Services," below, for
information regarding purchases via TeleTrade.
WHAT ELSE SHOULD I KNOW TO MAKE A PURCHASE?
You must specify at the time of investment whether you are purchasing Class A or
Class B shares.
Federal regulations require you to provide a certified taxpayer identification
number upon opening or reopening your account. Applications received without a
certified taxpayer identification number may be accepted but could be subject to
backup withholding by the Funds on any distributions, redemptions or other
disbursements.
If your check used for investment does not clear, a fee may be imposed by the
Transfer Agent. All payments should be in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. Please remember that the Company
reserves the right to reject any purchase order.
You should note that Bank of America, Service Organizations and registered
investment advisers may charge a separate fee or transaction charge to their
clients for providing them with administrative services related to their
investment in the Funds' shares. These fees could constitute a substantial
portion of smaller accounts and may not be in an investor's best interest. Bank
of America and Service Organizations may also impose minimum customer account
and other requirements in addition to those imposed by each Fund. If you
purchase or redeem shares directly from a Fund, you may do so without incurring
any charges other than those described in this Prospectus.
HOW TO SELL SHARES
HOW DO I REDEEM MY SHARES?
Time Horizon Funds makes it easy to sell, or "redeem," shares. A Fund imposes no
charge when you redeem shares (other than the contingent deferred sales charge
if you redeem Class B shares within 6 years of purchase). The value of the
shares you redeem may be more or less than your cost, depending on a particular
Fund's current net asset value.
If you purchased your shares through an account at Bank of America, your Broker
or another Service Organization, you may redeem all or part of your shares in
accordance with the instructions pertaining to that account. If you are also the
shareholder of record on the Fund's books, you may redeem shares in accordance
with the procedures described in the chart below as well as those of your
account. To use the redemption methods described below, you must arrange with
Bank of America or your Service Organization for delivery of the required
application(s) to the Transfer Agent.
21
<PAGE> 23
<TABLE>
<S> <C>
---------------------------------------------------------------------------------------------
TO SELL SHARES
---------------------------------------------------------------------------------------------
THROUGH BANK OF AMERICA, YOUR BROKER OR ANOTHER SERVICE ORGANIZATION
(ORDERS ARE NOT EFFECTIVE UNTIL RECEIVED BY THE TRANSFER AGENT IN PROPER FORM)
Contact them directly for instructions.
---------------------------------------------------------------------------------------------
THROUGH THE DISTRIBUTOR
(IF YOU ARE A SHAREHOLDER OF RECORD ON THE COMPANY'S BOOKS)
BY MAIL
Time Horizon Funds Send a signed, written request (each owner, including each
c/o BISYS Fund Services joint owner, must sign) to the Transfer Agent at the address
Ohio, Inc. on the left.
3435 Stelzer Road
Columbus, Ohio 43219
---------------------------------------------------------------------------------------------
IN PERSON
Time Horizon Funds
c/o BISYS Fund Services Deliver your signed, written request (each owner, including
Ohio, Inc. each joint owner, must sign) directly to the offices of the
3435 Stelzer Road Transfer Agent at the address on the left.
Columbus, Ohio 43219
---------------------------------------------------------------------------------------------
BY WIRE As soon as appropriate information regarding your bank
account has been established on your Fund account, you may
write, telephone or telegraph redemption requests to the
Transfer Agent, and redemption proceeds will be wired in
federal funds to the commercial bank you have specified.
Information regarding your bank account may be provided on
the Account Application or in a signature guaranteed letter
of instruction to the Transfer Agent. Signature guarantee
requirements are discussed in the section entitled "What
Kind Of Paperwork Is Involved In Selling Shares?"
Redemption proceeds will normally be wired the business day
after your request and any other necessary documents have
been received by the Transfer Agent.
Wire Privileges apply automatically unless you indicate on
the Account Application or in a subsequent written notice to
the Transfer Agent that you do not wish to have them.
Requests must be for at least $1,000 and may be subject to
limits on frequency and amount.
Wire Privileges may be modified or suspended at any time.
Contact your bank for information on any charges imposed by
the bank in connection with receipt of redemptions by wire.
</TABLE>
22
<PAGE> 24
<TABLE>
<S> <C>
TO SELL SHARES
---------------------------------------------------------------------------------------------
BY TELETRADE You may redeem Fund shares (minimum of $500 and maximum of
(a service permitting $50,000 per transaction) by telephone after appropriate
transfers of money to your information regarding your bank account has been established
checking, NOW or bank money on your Fund account. This information may be provided on
market account) the Account Application or in a signature guaranteed letter
of instruction to the Transfer Agent. Signature guarantee
requirements are discussed in the section entitled "What
Kind Of Paperwork Is Involved In Selling Shares?"
Redemption orders may be placed by calling (800) 247-9728.
TeleTrade Privileges apply automatically unless you indicate
on the Account Application or in a subsequent written notice
to the Transfer Agent that you do not wish to have them.
You should refer to the "Shareholder Services" section for
additional important information about the TeleTrade
Privilege.
OTHER REDEMPTION OPTIONS, INCLUDING EXCHANGES AND AUTOMATIC WITHDRAWALS, ARE ALSO
AVAILABLE. PLEASE REFER TO THE SECTION ENTITLED "SHAREHOLDER SERVICES" FOR MORE INFORMATION.
</TABLE>
WHAT "NAV" WILL I RECEIVE FOR SHARES
I WANT TO SELL?
Redemption orders are effected at the net asset value per share next determined
after receipt of the order in proper form by the Transfer Agent at its Columbus
office. Although the Funds impose no charge when Class A shares are redeemed, if
you purchase your Class A shares through Bank of America or a Service
Organization, they may charge a fee for providing certain services in connection
with investments in the Funds' shares. As described in the section "Shareholder
Guide -- How to Buy Shares," when you redeem your Class B shares within 6 years
of purchase, you may be subject to a contingent deferred sales charge.
The Company reserves the right to redeem any account (other than IRA and
non-working spousal IRA accounts) involuntarily if, after sixty days' written
notice, the account's net asset value remains below a $500 minimum balance.
WHAT KIND OF PAPERWORK IS INVOLVED
IN SELLING SHARES?
Redemption requests must be signed by each shareholder, including each joint
owner. When redeeming shares, you should indicate whether you are redeeming
Class A or Class B shares. If you own both Class A and Class B shares, Class A
shares will be redeemed first unless you request otherwise. Certain types of
redemption requests will need to include a signature guarantee. Signature
guarantees must accompany redemption requests for: (i) an amount in excess of
$50,000; (ii) any amount if the redemption proceeds are to be sent somewhere
other than the address of record on the Funds' books; or (iii) an amount of
$50,000 or less if the address of record has not been on the Funds' books for
sixty days.
You may obtain a signature guarantee from: (i) a bank which is a member of the
FDIC; (ii) a trust company; (iii) a member firm of a national securities
exchange; or (iv) another eligible guarantor institution. Guarantees must be
signed by an authorized signatory of the guarantor
23
<PAGE> 25
institution and be accompanied by the words "Signature Guaranteed." The Transfer
Agent will not accept guarantees from notaries public.
HOW QUICKLY CAN I RECEIVE MY REDEMPTION PROCEEDS?
The Fund ordinarily will make payment for all shares redeemed within three days
after the Transfer Agent receives a request in proper form, except as provided
by the rules of the Securities and Exchange Commission. However, if the shares
to be redeemed have been purchased by check or by TeleTrade, the Company will,
upon the clearance of the purchase check or TeleTrade payment, mail the
redemption proceeds. It may take up to 15 days for the purchase check or
TeleTrade payment to clear. This does not apply to situations where a Fund
receives payment in cash or immediately available funds for the purchase of
shares.
Bank of America and the Service Organizations are responsible for transmitting
redemption orders and crediting their customers' accounts with redemption
proceeds on a timely basis.
DO I HAVE ANY REINSTATEMENT PRIVILEGES AFTER I HAVE REDEEMED SHARES?
You may reinvest all or any portion of your redemption proceeds in shares of the
same class of the Time Horizon Fund out of which you redeemed, in like shares of
another Fund in the Time Horizon Series of Funds or in like shares of a Pacific
Horizon load fund within 90 days of your redemption trade date without paying a
sales load. Upon such a reinvestment, the Distributor will credit to your
account any contingent deferred sales charge imposed on any redeemed Class B
shares. Shares so reinvested will be purchased at a price equal to the net asset
value next determined after the Transfer Agent receives a reinstatement request
and payment in proper form.
If you wish to use this privilege, you must submit a written reinstatement
request to the Transfer Agent stating that you are eligible to use the
privilege. The reinstatement request and payment must be received within 90 days
of the trade date of the redemption. Currently, there are no restrictions on the
number of times you may use this privilege.
Generally, exercising the Reinstatement Privilege will not affect the character
of any gain or loss realized on redemption for federal income tax purposes.
However, if a redemption results in a loss, the reinstatement may result in the
loss being disallowed under IRS "wash sale" rules.
DIVIDEND AND DISTRIBUTION POLICIES
Shareholders of a Fund are entitled to dividends and distributions arising from
the net investment income and net realized gains, if any, earned on investments
of the Fund. A Fund's net income and net capital gains (if any) are declared and
paid annually. Distributions are paid within five business days after the end of
the year.
You will automatically receive dividends and capital gain distributions in
additional shares without a sales load unless you: (i) elect in writing to
receive payment in cash; or (ii) elect to participate in the Directed
Distribution Plan described in the section below entitled "Can My Dividends From
A Fund Be Invested In Other Funds?" To elect to receive payment in cash, or to
revoke such election, you must do so in writing to the Transfer Agent, BISYS
Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219. The election
or revocation will become effective with respect to dividends paid after it is
received by the Transfer Agent.
24
<PAGE> 26
SHAREHOLDER SERVICES
TIME HORIZON FUNDS PROVIDES A VARIETY OF WAYS TO MAKE MANAGING YOUR
INVESTMENTS MORE CONVENIENT.
Some or all of the following services and privileges as well as others described
in this Prospectus may not be available for, or may have different conditions
imposed on them than as described in this Prospectus with respect to, certain
clients of Bank of America and particular Service Organizations. Consult these
entities for more information.
CAN I USE A FUND IN MY RETIREMENT PLAN?
You are able to set up Individual Retirement Accounts ("IRAs"), including IRAs
under a Simplified Employee Pension Plan ("SEP-IRAs") and IRA "Rollover
Accounts." YOUR INVESTMENTS GROW TAX DEFERRED UNTIL WITHDRAWAL AT RETIREMENT AND
IN MANY CASES THE INITIAL INVESTMENT IS TAX DEDUCTIBLE. For details, contact the
Distributor at (800) 247-9728. Investors should also read the IRA Disclosure
Statement and the Bank Custodial Agreement for further details on eligibility,
service fees and tax implications, and should consult their tax adviser.
CAN I EXCHANGE MY INVESTMENT FROM ONE FUND TO ANOTHER?
As a shareholder, you have the privilege of exchanging your shares for shares of
the same class of another Time Horizon Fund or of a Pacific Horizon Fund that
legally may be sold in your state of residence (the "Exchange Privilege"). An
investment in a Fund automatically entitles you to use the Exchange Privilege
unless you indicate on the Account Application or in a subsequent letter to the
Transfer Agent that you do not wish to use the Exchange Privilege. No additional
sales load will be incurred when exchanging Class A shares purchased with a
sales load for Class A shares of another load fund. Class B shares of a Fund may
be exchanged for Class B shares of any other Fund or for Pacific Horizon Shares
of the Pacific Horizon Prime Fund (the "Prime Fund") without payment of any
contingent deferred sales charge at the time the exchange is made. In
determining the holding period for calculating the contingent deferred sales
charge payable upon redemption of Class B shares, the holding period of the
shares originally held will be added to the holding period of the Class B shares
acquired through exchange. However, if Class B shares are exchanged for shares
of the Prime Fund, the holding period of the Prime Fund shares will not count
toward the total holding period of the Class B shares.
Fund share transactions pursuant to the Exchange Privilege must have a current
value of at least $500 and are subject to the minimum initial investment
requirements of the particular Fund into which the exchange is being made. You
may obtain a prospectus regarding the Fund into which you wish to make an
exchange from your Service Organization or the Fund's Distributor.
You may provide instructions to effect the Exchange Privilege described above by
calling the Transfer Agent at (800) 247-9728. (See the section below entitled
"What is TeleTrade?" for a description of the Company's policy regarding
responsibility for telephone instructions.) You may also send exchange
instructions in writing by following the directions set forth previously under
"How To Sell Shares."
If you would like more information on the Exchange Privilege, please read the
Statement of Additional Information and consult your Service Organization or the
Distributor.
The Funds reserve the right to reject any exchange request and the Exchange
Privilege may be modified or terminated at any time. At least 60 days' notice of
any material modification or termination will be given to shareholders
25
<PAGE> 27
except where notice is not required under the regulations of the Securities and
Exchange Commission.
WHAT IS TELETRADE?
TELETRADE IS A SERVICE WHICH ALLOWS YOU TO AUTHORIZE ELECTRONIC TRANSFERS OF
MONEY TO PURCHASE SHARES IN OR REDEEM SHARES FROM AN ESTABLISHED FUND ACCOUNT.
THE SERVICE MAY BE USED LIKE AN "ELECTRONIC CHECK" TO MOVE MONEY BETWEEN AN
ACCOUNT AT A FINANCIAL INSTITUTION AND A FUND ACCOUNT WITH A SINGLE TELEPHONE
CALL.
Purchase and redemption proceeds with respect to TeleTrade transactions will be
transferred between your Fund account and the checking, NOW or bank money market
account designated by you. Only an account maintained at a domestic financial
institution that is an Automated Clearing House member may be so designated.
TeleTrade purchases will be effected at the public offering price next
determined after the Transfer Agent receives payment for the transaction.
Redemption proceeds will be on deposit in your account at your financial
institution generally two business days after the redemption request is received
by the Transfer Agent. You may also request receipt of your redemption proceeds
by check, which will be payable to the registered owners of your Fund account
and will be sent only to the address of record.
You should note that the Transfer Agent may act upon a telephone redemption
request (including a telephone wire redemption request) from any person
representing himself or herself to be you and reasonably believed by the
Transfer Agent to be genuine. Neither the Company nor any of its service
contractors will be liable for any loss or expense in acting upon telephone
instructions that are reasonably believed to be genuine. In attempting to
confirm that telephone instructions are genuine, the Company will use such
procedures as are considered reasonable. These procedures include (1)
establishing the identity of the caller by use of a "Personal Identification
Number" and/or confirming the shareholder's name, address and Taxpayer
Identification Number; (2) recording all telephone conversations with the
Transfer Agent; (3) transmitting redemption proceeds only according to
previously established instructions; and (4) mailing a statement confirming each
transaction to the shareholder. If you should experience difficulty in
contacting the Transfer Agent to place telephone redemptions (including
telephone wire redemption requests), for example because of unusual market
activity, you are urged to consider redeeming your shares by mail or in person.
The Funds may modify the TeleTrade Privilege at any time or charge a service fee
upon notice to shareholders. No such fee currently is contemplated.
CAN I ARRANGE TO HAVE AUTOMATIC
INVESTMENTS MADE ON A REGULAR BASIS?
YOU MAY ARRANGE, THROUGH THE AUTOMATIC INVESTMENT PROGRAM, FOR SYSTEMATIC
INVESTMENTS IN YOUR FUND ACCOUNT IN AMOUNTS OF $50 OR MORE BY DIRECTLY DEBITING
YOUR ACCOUNT AT YOUR FINANCIAL INSTITUTION. At your option, your checking, NOW
or bank money market account designated by you will be debited in the specified
amount, and a particular Fund's shares will be purchased, once a month, on
either the first or fifteenth day, or twice a month, on both days. Only accounts
maintained at a domestic financial institution which permits automatic
withdrawals and is an Automated Clearing House member are eligible. The
Automatic Investment Program is one means by which you may use Dollar Cost
Averaging in making investments.
WHAT IS DOLLAR COST AVERAGING AND HOW CAN I IMPLEMENT IT?
DOLLAR COST AVERAGING INVOLVES INVESTING A FIXED DOLLAR AMOUNT AT REGULAR
PREDETERMINED INTERVALS. BECAUSE MORE SHARES ARE BOUGHT DURING PERIODS WITH
LOWER SHARE PRICES AND FEWER SHARES ARE BOUGHT WHEN THE PRICE IS HIGHER, YOUR
AVERAGE COST PER SHARE MAY BE REDUCED. You may also implement Dollar Cost
Averaging on your own initiative or through other entities.
26
<PAGE> 28
In order to be effective, Dollar Cost Averaging should be followed on a
sustained, consistent basis. You should be aware, however, that shares bought
using Dollar Cost Averaging are purchased without regard to their price on the
day of investment or to market trends. In addition, while you may find Dollar
Cost Averaging to be beneficial, it will not prevent a loss if you ultimately
redeem your shares at a price that is lower than their purchase price.
To establish an Automatic Investment account that uses the Dollar Cost Averaging
method, check the appropriate box and supply the necessary information on the
Account Application or in a subsequent written request to the Transfer Agent.
You may cancel this privilege or change the amount of purchase at any time by
mailing written notification to the Transfer Agent.
Notification will be effective three business days following receipt. The Funds
may modify or terminate this privilege at any time or charge a service fee,
although no such fee currently is contemplated.
CAN I ARRANGE PERIODIC WITHDRAWALS?
IF YOU ARE A SHAREHOLDER WITH A FUND ACCOUNT VALUED AT $5,000 OR MORE, YOU MAY
WITHDRAW AMOUNTS IN MULTIPLES OF $50 FROM YOUR ACCOUNT ON A MONTHLY, QUARTERLY,
SEMI-ANNUAL OR ANNUAL BASIS THROUGH THE AUTOMATIC WITHDRAWAL PLAN.
At your option, monthly, quarterly, semi-annual and annual withdrawals will be
made on either the first or fifteenth day of the particular month selected. To
participate in this Plan, check the appropriate box and supply the necessary
information on the Account Application or in a subsequent signature guaranteed
written request to the Transfer Agent. Purchases of additional shares
concurrently with withdrawals are ordinarily not advantageous because of the
Funds' sales load.
Use of this Plan may also be disadvantageous for Class B shares during the first
6 years shares are held, due to the potential need to pay a contingent deferred
sales charge.
CAN MY DIVIDENDS FROM A FUND BE
INVESTED IN OTHER FUNDS?
YOU MAY ELECT TO HAVE YOUR DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, OR BOTH
("DISTRIBUTION PROCEEDS") RECEIVED FROM A NON-RETIREMENT FUND ACCOUNT
AUTOMATICALLY INVESTED IN SHARES OF ANY OTHER INVESTMENT PORTFOLIO OF THE
COMPANY, OR IN SHARES OF AN INVESTMENT PORTFOLIO OF PACIFIC HORIZON FUNDS,
PROVIDED SUCH SHARES ARE HELD IN A NON-RETIREMENT ACCOUNT. To participate in
this program, known as the Directed Distribution Plan, check the appropriate box
and supply the necessary information on the Account Application or subsequently
send a written request to the Transfer Agent. Investments will be made at a
price equal to the net asset value of the purchased shares next determined after
receipt of the distribution proceeds by the Transfer Agent.
There are no subsequent investment requirements for accounts to which
distribution proceeds are directed nor are service fees currently charged for
effecting these transactions.
IS THERE A SALARY DEDUCTION PLAN AVAILABLE?
YOU MAY PURCHASE A FUND'S SHARES BY HAVING PAYMENTS AUTOMATICALLY DEPOSITED INTO
YOUR FUND ACCOUNT (MINIMUM OF $50 AND MAXIMUM OF $50,000 PER TRANSACTION) IF YOU
RECEIVE A FEDERAL SALARY, SOCIAL SECURITY OR CERTAIN VETERAN'S, MILITARY OR
OTHER PAYMENTS FROM THE FEDERAL GOVERNMENT. Subject to these limitations, you
may deposit as much of your payments as you wish. For instructions on how to
enroll in this Direct Deposit Program, call the Transfer Agent at (800)
247-9728.
Note: Death or legal incapacity will terminate participation in the Program. You
may also choose at any time to terminate your participation by notifying the
appropriate federal agency in writing. Further, a Fund may terminate your
participation after 30 days' notice.
27
<PAGE> 29
THE BUSINESS OF THE FUNDS
BOARD OF TRUSTEES
The business affairs of Time Horizon Funds are managed under the general
supervision of its Board of Trustees, under the laws of the State of Delaware.
Information about the Trustees and officers of the Company is included in the
Statement of Additional Information in the section entitled "Management."
EXPENSES
Operating expenses borne by the Funds include taxes, fees and expenses of the
Trustees and officers, administration, custodial and transfer agency fees,
certain insurance premiums, outside auditing and legal expenses, costs of
shareholder reports and meetings and any extraordinary expenses. The Funds'
expenses also include Securities and Exchange Commission fees, state securities
qualification fees, costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders, and certain shareholder servicing fees. Except as noted
in this Prospectus, the service contractors bear all expenses in connection with
the performance of their services and the Funds bear the expenses incurred in
their operations.
MANAGER
Bank of America serves as the Funds' Manager. Bank of America is a subsidiary of
BankAmerica Corporation, a registered bank holding company. Its principal
offices are located at 555 California Street, San Francisco, California 94104.
Formed in 1904, Bank of America is a national banking association that provides
commercial banking and trust business through an extensive system of branches
across the western United States. Bank of America's principal banking affiliates
operate branches in ten U.S. states as well as corporate banking and business
credit offices in major U.S. cities and branches, corporate offices and
representative offices in 37 countries.
In its management agreement, Bank of America has agreed to manage the Funds'
investments and to be responsible for, place orders for, and make decisions with
respect to, all purchases and sales of the Funds' securities. The management
agreement also provides that Bank of America may, in its discretion, provide
advisory services through its own employees or employees of one or more of its
affiliates that are under the common control and management of Bank of America's
parent, BankAmerica Corporation. Bank of America may also employ a sub-adviser
provided that Bank of America remains fully responsible to the Funds for the
acts and omissions of the sub-adviser.
Bank of America Illinois' Investment Advisors Division is responsible for the
day-to-day investment activities of the Funds. The investment management team is
headed by James Miller, Executive Vice President and Chief Investment Officer of
BofA Illinois (a wholly-owned subsidiary of BankAmerica Corporation). Mr. Miller
has been associated with BofA Illinois (and its predecessor Continental Bank)
since 1988. Mr. Miller is a Chartered Financial Analyst, a member of the
Association of Investment Management and Research, and a Director of the
Investment Analysts Society of Chicago.
Under its management agreement, Bank of America has also agreed to provide
statistical and research data, data processing services, and clerical services,
and coordinate the preparation of reports to shareholders of the Funds and the
Securities and Exchange Commission.
For its services as manager, Bank of America is entitled to receive a fee from
the Funds at the
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annual rate of .60% of the Funds' average daily net assets. This amount may be
reduced pursuant to undertakings by Bank of America. (See the information below
in the section entitled "Fee Waivers.") In addition, Bank of America, and its
affiliates may be entitled to fees under the Shareholder Services Plan as
described below in "Plan Payments" and may receive fees charged directly to
their accounts in connection with investments in a particular Fund's shares.
Pursuant to the authority granted in its management agreement, Bank of America
has entered into a Sub-Administration Agreement with BISYS Fund Services Limited
Partnership ("BISYS Fund Services") under which BISYS Fund Services will perform
certain of the services listed above, e.g., pay the costs of maintaining the
offices of the Company, maintain the registration or qualification of the Funds'
shares for sale under state securities laws; maintain books and records of the
Funds; and generally assist in all aspects of the operations of the Funds. Bank
of America bears all fees and expenses charged by BISYS for these services.
FUND ACCOUNTANT
BISYS Fund Services Ohio, Inc. ("BISYS") serves as fund accountant of the Funds.
In its accounting services agreement, BISYS has agreed to provide certain
accounting services to the Funds including calculation of the net asset value of
the Funds, and dividends and capital gains distributions to shareholders, and
preparation of tax returns.
For its services under its accounting services agreement, BISYS is entitled to
receive an annual fee from the Funds based on the greater of $2,500 or the
following fee schedule: 0.0125% of the Funds' average net assets between $10
million and $50 million; 0.025% of average net assets between $50 million and
$200 million; 0.02% of average net assets between $200 million and $500 million;
and 0.015% of average net assets greater than $500 million. This amount may be
reduced pursuant to undertakings by Bank of America. (See the information below
in the section entitled "Fee Waivers.")
DISTRIBUTOR
The Funds' shares are sold on a continuous basis by Concord Financial Group,
Inc. The Distributor is an indirect, wholly-owned subsidiary of The BISYS Group,
Inc. Its principal office is located at 3435 Stelzer Road, Columbus, Ohio
43219-3035.
CUSTODIAN AND TRANSFER AGENT
PNC Bank, N.A., Broad and Chestnut Streets, Philadelphia, Pennsylvania, 19101
serves as the custodian of the Fund. BISYS Fund Services Ohio, Inc. is the
transfer and dividend disbursing agent of the Funds and is located at 3435
Stelzer Road, Columbus, Ohio, 43219.
FEE WAIVERS
Bank of America has agreed to reduce its fees and absorb other operating
expenses to ensure that the operating expenses for each Fund (other than
interest, taxes, brokerage commissions and other portfolio transaction expenses,
capital expenditures and extraordinary expenses) will not exceed 1.00% and 1.75%
of the average net assets of each Fund's Class A and Class B shares,
respectively, on an annual basis for the first twelve months of the Funds'
operations.
Expenses can also be reduced by voluntary fee waivers and expense reimbursements
by Bank of America and other service providers as well as by certain expense
limitations imposed by state securities regulators. From time to time during the
course of the Funds' fiscal year, Bank of America and/or the Distributor may
prospectively waive fee payments and/or may assume certain of the Funds'
expenses as a result of competitive pressures and in order to preserve and
protect the business and reputation of Bank of America and the Distributor. This
will have the effect of increasing yield to investors at the time such fees are
not received or amounts are assumed, and decreasing yield when such fees or
amounts are reimbursed. However, the service
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providers retain the ability to stop such fee waivers at any time.
PLAN PAYMENTS
THE COMPANY HAS ADOPTED A SHAREHOLDER SERVICE PLAN FOR CLASS A AND CLASS B
SHARES, AND A DISTRIBUTION PLAN FOR CLASS B SHARES
The Company has adopted a Shareholder Service Plan for Class A and Class B
shares, under which the Class A and Class B shares of the Funds reimburse the
Distributor and Service Organizations for shareholder servicing expenses
incurred. 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.
THE SHAREHOLDER SERVICE PLAN
Shareholder servicing expenses include expenses incurred in connection with
shareholder services provided by the Distributor and payments to Service
Organizations for support services for the beneficial owners of a Fund's shares,
such as establishing and maintaining accounts and records relating to the
Service Organization's clients who invest in Fund shares; assisting those
clients in processing exchange and redemption requests and in changing dividend
options and account designations; and responding to inquiries from clients
concerning their investments.
Under the Shareholder Service Plan, payments by a Fund for shareholder servicing
expenses may not exceed 0.25% (annualized) of the Fund's average daily net
assets.
If in any month the Distributor is due more monies than are immediately payable
because of the percentage limitation described above, the unpaid amount is
"carried forward" from month to month while the Shareholder Service Plan is in
effect until such time when it may be paid. However, any "carried forward"
amounts will not be payable beyond the fiscal year during which the amounts are
accrued. No interest, carrying or other finance charge is borne by a Fund with
respect to the amount "carried forward."
Banks may act as Service Organizations. The Glass-Steagall Act and other
applicable laws, among other things, prohibit banks from engaging in the
business of underwriting securities. If a bank were prohibited from acting as a
Service Organization its shareholder clients would be permitted to remain
Company shareholders and alternative means for continuing the servicing of such
shareholders would be sought. In such event, changes in the operation of the
Company might occur and a shareholder serviced by such bank might no longer be
able to avail itself of the automatic investment or other services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
THE DISTRIBUTION PLAN
Distribution expenses include advertising and marketing expenses, commissions
and other payments to broker-dealers and others which have entered into
agreements with the Distributor, the expenses of preparing, printing and
distributing prospectuses, and indirect and overhead costs associated with the
sale of Class B shares.
Under the Distribution Plan, payments by the Class B shares of a Fund for
distribution expenses are incurred at the rate of 0.75% (annualized) of the
average daily net assets of the Fund attributable to the Class B shares. This
amount may be reduced pursuant to the undertakings by the Distributor.
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The Distribution Plan is a "compensation" plan, which means that the
distribution fees paid to the Distributor under the Plan are intended to
compensate the Distributor for services rendered and expenses borne even if the
amounts paid exceed the Distributor's actual expenses (in which case the
Distributor would realize a profit). If in any month the Distributor's expenses
incurred in connection with the distribution of a Fund's Class B shares exceed
the distribution fees paid by the Fund, the Distributor will recover the excess
only if the Distribution Plan with respect to such shares continues to be in
effect in some later year when the distribution fees exceed the Distributor's
expenses. No interest, carrying or other finance charge is borne by a Fund with
respect to any amounts "carried forward," and no Fund will be obligated to pay
any unreimbursed expenses that may exist at such time, if any, as the
Distribution Plan is terminated.
TAX INFORMATION
YOU WILL BE ADVISED AT LEAST ANNUALLY REGARDING THE FEDERAL INCOME TAX
TREATMENT OF DIVIDENDS AND DISTRIBUTIONS MADE TO YOU. YOU SHOULD SAVE YOUR
ACCOUNT STATEMENTS BECAUSE THEY CONTAIN INFORMATION YOU WILL NEED TO CALCULATE
YOUR CAPITAL GAINS OR LOSSES UPON YOUR ULTIMATE SALE OR EXCHANGE OF SHARES IN
THE FUNDS.
As with any investment, you should consider the tax implications of an
investment in a Fund. The following is only a brief summary of some of the
important tax considerations generally affecting the Funds and their
shareholders. Consult your tax adviser with specific reference to your own tax
situation.
FEDERAL TAXES
Each Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code (the "Code") for the current taxable year. As a result of
this qualification, the Funds generally are not required to pay federal income
taxes to the extent earnings are distributed in accordance with the Code. The
Funds intend to qualify for this special tax treatment as long as it is in the
best interest of shareholders.
Distributions (whether received in cash or additional shares) of ordinary income
and/or excesses of net short-term capital gain over net long-term capital loss
are taxable to the shareholder as ordinary income. (These distributions are
eligible for the dividends received deduction allowed to corporations to the
extent of the total qualifying dividends received by the Funds from domestic
corporations for the taxable year.)
Any distribution you receive comprised of the excess of net long-term capital
gain over net short-term capital loss will be taxed as a long-term capital gain
no matter how long you have held a Fund's shares. (Such distributions are not
eligible for the dividends received deduction allowed to corporations.)
A dividend paid to a shareholder by the Funds in January of a particular year
will be deemed to have been received by the shareholder on December 31 of the
preceding year, if the dividend is declared and payable to shareholders of
record on a specified date in October, November or December of that preceding
year.
If you are considering buying shares of a Fund on or just before the record date
of a dividend, you should be aware that the amount of the forthcoming dividend
payment, although in effect a return of capital, will be taxable to you.
You may realize a taxable gain (or loss) upon redemption or exchange of a Fund's
shares, depending upon the tax basis of your shares and
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their price at the time of such redemption or exchange. Generally, you may
include sales loads incurred in the purchase of a Fund's shares in your tax
basis when determining your gain (or loss) on a redemption or exchange of these
shares. However, if you exchange such shares for shares of another Fund in the
Time Horizon Funds within 90 days of the purchase and are able to reduce the
sales load on the new shares through the Exchange Privilege, the reduction may
not be included in the tax basis of your exchanged shares. It may be included in
the tax basis of the new shares. If you hold a Fund's shares for six months or
less and during that time receive a capital gain dividend on those shares, any
loss on the sale or exchange of those shares will be treated as a long-term
capital loss to the extent of the capital gain dividend.
Certain interest income and dividends earned by the Funds from foreign
securities is expected to be subject to foreign withholding taxes or other
taxes. Certain realized gains or losses on the sale or retirement of foreign
bonds held by a Fund, to the extent attributable to fluctuations in currency or
exchange rules, as well as other gains or losses attributable to exchange rate
fluctuations, are typically treated as ordinary income or loss. Such income or
loss may increase or decrease (or possibly eliminate) income available for
distribution. If, under the rules governing the tax treatment of foreign
currency gains and losses, income available for distribution is decreased or
eliminated, all or a portion of the dividends declared by a Fund may be treated
for federal income tax purposes as a return of capital, or in some
circumstances, as capital gain. Generally, your tax basis in your Fund shares
will be reduced to the extent that an amount distributed to you is treated as a
return of capital.
STATE AND LOCAL TAXES
You should consult your tax adviser regarding state and local tax consequences
which may differ from the federal tax consequences described above.
MEASURING PERFORMANCE
A FUND'S PERFORMANCE MAY BE QUOTED IN TERMS OF AVERAGE ANNUAL TOTAL RETURN AND
AGGREGATE TOTAL RETURN. PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT
INTENDED TO INDICATE FUTURE RESULTS.
Average annual total return reflects the average annual percentage change in
value of an investment in a Fund over the period being measured, while aggregate
total return reflects the total percentage change in value over the period being
measured.
Periodically, a Fund's total return (calculated on an average annual total
return and/or an aggregate total return basis for various periods) may be quoted
in advertisements or in communications to shareholders. Both methods of
calculating total return reflect the sales load charged by a Fund and assume
dividends and capital gains distributions made by the Fund during the period are
reinvested in Fund shares. A Fund may also advertise total return data without
reflecting the sales load imposed on the purchase of Fund shares in accordance
with the rules of the Securities and Exchange Commission. Quotations that do not
reflect the sales load will, of course, be higher than quotations that do
reflect sales loads.
A Fund may compare its total return to that of other mutual funds with similar
investment objectives and to stock and other relevant indexes or to rankings
prepared by independent services or other financial or industry publications
that monitor mutual fund performance. For example, a Fund's total return may be
compared to the Consumer Price Index or to data prepared
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by: Lipper Analytical Services, Inc.; Donoghue's Money Fund Report; Mutual Fund
Forecaster; Morningstar; Micropal; Wiesenberger Investment Companies Services;
or CDA Investment Technologies, Inc. Total return data as reported in national
financial publications such as Money, Forbes, Barron's, The Wall Street Journal
and The New York Times, or in local or regional publications, may also be used
in comparing Fund performance. A Fund's total return also may be compared to
indices such as: the Dow Jones Industrial Average; the Financial Times World
Stock Index; the Europe, Asia and Far East Index ("EAFE"); the Lipper
International Fund Index; the Standard & Poor's 500 Stock Index; the Shearson
Lehman Bond Indexes; or the Wilshire 5000 Equity Indexes.
Since a Fund's performance will fluctuate, it should not be compared with bank
deposits, savings accounts and similar investments that often provide an agreed
or guaranteed fixed yield for a stated period of time. Performance is generally
a function of the kind and quality of the instruments in a portfolio, portfolio
maturity, operating expenses and market conditions. Not included in a Fund's
calculations of total return are fees charged by Bank of America and other
Service Organizations directly to their customer accounts in connection with
investments in a Fund (e.g. account maintenance fees, compensating balance
requirements or fees based upon account transactions, assets or income).
DESCRIPTION OF SHARES
THE COMPANY IS A DELAWARE BUSINESS TRUST THAT WAS ORGANIZED ON APRIL 12, 1995.
ABOUT THE COMPANY
THE COMPANY'S CHARTER AUTHORIZES THE BOARD OF TRUSTEES TO ISSUE AN UNLIMITED
NUMBER OF SHARES OF BENEFICIAL INTEREST AND TO CLASSIFY AND RECLASSIFY ANY
AUTHORIZED AND UNISSUED SHARES INTO ONE OR MORE CLASSES OF SHARES.
Shares representing beneficial interests in a Fund are entitled to participate
in the dividends and distributions declared by the Board of Trustees and in the
net distributable assets of the Fund on liquidation. The Funds' shares have no
preemptive rights and only such conversion and exchange rights as the Board may
grant in its discretion. When issued for payment as described in this
Prospectus, a Fund's shares will be fully paid and non-assessable.
VOTING RIGHTS
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held. Additionally, shareholders will vote in the
aggregate and not by class or series, except as required by law (or when
permitted by the Board of Trustees). Only Class A shares will vote on matters
relating solely to Class A and only Class B shares will vote on matters (such as
the distribution plan described above) relating solely to Class B. The Funds do
not presently intend to hold annual meetings of shareholders to elect trustees
or for other business unless and until such time as less than a majority of the
trustees holding office has been elected by the shareholders. At that time, the
trustees then in office will call a shareholders' meeting for the election of
trustees. Under certain circumstances, however, shareholders have the right to
call a shareholder meeting to consider the removal of one or more trustees. Such
meetings will be held when requested by the shareholders of 10% or more of the
Company's outstanding shares of beneficial interest. Each Fund will assist in
shareholder communications in such matters to the extent required by law and the
Company's undertaking with the Securities and Exchange Commission.
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TIME HORIZON FUNDS
--------------------
PORTFOLIO 1
PORTFOLIO 2
PORTFOLIO 3
PROSPECTUS
FEBRUARY 5, 1996
LOGO
NOT FDIC INSURED
COPTMHR96P
