<PAGE> 1
TIME HORIZON FUNDS
PORTFOLIO 1
PORTFOLIO 2
PORTFOLIO 3
Semi-Annual Report
December 31, 1995
[TIME HORIZON FUNDS LOGO]
Not FDIC Insured
<PAGE> 2
TIME HORIZON FUNDS
3435 Stelzer Road, Columbus, OH 43219
1-800-247-9728
<TABLE>
<S> <C>
MANAGER INDEPENDENT ACCOUNTANTS
Bank of America National Trust and Coopers and Lybrand, LLP
Savings Association 350 S. Grand Avenue
555 California Street Los Angeles, CA 90071
San Francisco, CA 94104
DISTRIBUTOR FUND COUNSEL
Concord Financial Group, Inc. Vedder, Price, Kaufman
3435 Stelzer Road & Kammholz
Columbus, OH 43219 222 S. LaSalle Street
Chicago, IL 60601
</TABLE>
SUB-ADMINISTRATOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
FUND SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY, NOR ARE THEY OBLIGATIONS
OF OR OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
The Time Horizon Funds are sponsored and distributed by Concord Financial Group,
Inc., which is unaffiliated with Bank of America. Bank of America serves as
manager and receives fees for such services. From time to time, Bank of America
may provide other services to the Funds for additional fees, as disclosed in the
Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.
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<S> <C>
NOT INVESTMENTS IN THE TIME HORIZON FUNDS ARE NOT BANK DEPOSITS
FDIC AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, BANK OF AMERICA
INSURED OR ANY OF ITS AFFILIATES. MUTUAL FUNDS ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
</TABLE>
<PAGE> 3
...................................
Contents
<TABLE>
<S> <C>
UNDERSTANDING YOUR
SHAREHOLDER REPORT 2
TIME HORIZON FUND FACTS 5
LETTER FROM THE MANAGER 6
STATEMENTS OF ASSETS
AND LIABILITIES 14
STATEMENTS OF OPERATIONS 15
STATEMENTS OF CHANGES
IN NET ASSETS 16
SCHEDULES OF PORTFOLIO
INVESTMENTS 17
NOTES TO FINANCIAL STATEMENTS 31
FINANCIAL HIGHLIGHTS 35
</TABLE>
<PAGE> 4
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the
information from the report.
The TABLE OF CONTENTS helps you locate [GRAPHIC]
the information you want.
The LETTER FROM THE MANAGER
provides a brief overview of the
economy and how it affects the
financial markets.
Because a picture or chart can help clarify the
text, The TIME HORIZON FUND FACTS illustrate the
most important features of the Funds. The
illustrations represent the current asset allocation
[GRAPHIC]
and target asset allocation ranges for each
portfolio, as well as a brief description of the
Manager's investment strategy.
2
<PAGE> 5
The financial statements summarize and describe the Funds' financial
transactions. They are broken down into four different statements, which are
illustrated below:
The SCHEDULES OF PORTFOLIO INVESTMENTS list each investment holding in the Funds
as of the date of the report. Investments may be grouped by category (by
industry or security type, for example). The percentage of each Fund's net
assets represented by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
PORTFOLIO HOLDINGS WITH SHARES AND MARKET VALUE
AS OF REPORT DATE
The STATEMENTS OF ASSETS AND LIABILITIES list all the assets and liabilities of
the Funds as of the date of the statements. This is an individual fund's
"balance sheet." Also disclosed in the statements are the Funds' net asset
values per share and their maximum offering prices per share as of the date of
the statements. The statements also list the accounts that comprise the Funds'
net assets (capital stock, undistributed income, etc.).
SUMMARY OF THE FUND'S INVESTMENTS AND ALL OTHER
ASSETS OWNED BY THE FUND, INCLUDING AMOUNTS
OWED TO THE FUND BY OUTSIDE PARTIES
SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
[GRAPHIC] BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET ASSETS
DIVIDED BY THE NUMBER OF SHARES OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
3
<PAGE> 6
The STATEMENTS OF OPERATIONS show the amount of dividend and interest income
earned from each Fund's investments, the expenses incurred by the Funds from
their operations and any gains or losses, both realized and unrealized, by the
Funds from holding and/or selling any investments.
INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
[GRAPHIC] FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS
The STATEMENTS OF CHANGES IN NET ASSETS show the changes in the net assets of
the Funds during each of the two most recent reporting periods. The changes in
net assets are generally broken down into four distinct sections:
OPERATIONS: SEE STATEMENTS OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
NET REALIZED GAINS: TOTAL REALIZED GAINS
[GRAPHIC] DISTRIBUTED TO SHAREHOLDERS DURING THE PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE PERIODS
The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Funds,
contractual arrangements between the Funds and their service providers, certain
transactions effected by the Funds and other general information about the
Funds.
The FINANCIAL HIGHLIGHTS show, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Funds. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for the Funds, the ratio of expenses to average net
assets and the ratio of net investment income to average net assets.
4
<PAGE> 7
TIME HORIZON FUND FACTS
The Time Horizon Funds offer three asset allocation portfolios that target
specific investment time horizons, shown below. Each portfolio seeks to provide
long-term investors maximum total return over its stated time period, while also
increasingly emphasizing capital preservation as the Fund approaches its target
time horizon.
To accomplish this, the investment management team will invest in a
combination of stocks, bonds and cash. The mix among these asset categories will
change according to current market conditions, as well as to how close the
portfolio is to its target time horizon. By selecting the Time Horizon Fund that
most closely matches the expected timing of major investment goals, such as
sending a child to college, retirement or purchasing a home, you'll be investing
in a portfolio that is managed with an investment time horizon similar to that
of your own goals.
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
TIME HORIZON 2005 2015 2025
CURRENT FOCUS(1) Growth Growth Growth
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSET ALLOCATION(2,3)
(AS OF 12/31/95)
[CHART] [CHART] [CHART]
Cash 20% 14% 22%
Stocks 29% 42% 53%
Bonds 51% 44% 25%
- --------------------------------------------------------------------------------------------
CURRENT ALLOCATION RANGES(4)
STOCKS 15%-45% 30%-70% 40%-100%
BONDS 55%-85% 30%-70% 0%-60%
CURRENT TARGET
ASSET ALLOCATION
[CHART] [CHART] [CHART]
Bonds/Cash 65% 50% 30%
Stocks 35% 50% 70%
- --------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
1 Each Time Horizon Fund moves through three general stages of investment
management focus as the portfolio moves closer to its target time horizon:
growth, moderation and preservation. The portfolio is currently being managed
with the focus noted. The portfolio will change its focus over time,
increasingly emphasizing capital preservation as it nears its target time
horizon. After a portfolio reaches its time horizon target date, it is
anticipated that it will continue to be managed with a predominant emphasis on
capital preservation.
2 The portfolio's composition is subject to change.
3 Until a Fund attains an asset level of approximately $15 million, the Fund's
portfolio may be invested in fewer securities within each strategic asset
allocation class than it otherwise would.
4 Under normal market conditions, each portfolio is currently managed within the
strategic asset allocation ranges shown, based on the portfolio manager's
evaluation of the anticipated returns and risks for the various asset classes
in the near term.
5
<PAGE> 8
LETTER FROM THE MANAGER
Dear Shareholder:
The year ending December 31, 1995, was an exciting [Pat_Lynch_Photo]
period for investors. Stock prices, as measured by the Patrick C. Lynch,
S&P 500 Stock Index, rose some 37%, while long-term CFA
bonds gained an impressive 20% during the period. Senior Vice
President
Amid the excitement, it's essential to remember that Investment Advisors
such gains are far from the norm. During the past 60 Division
years, the stock market has delivered more modest Bank of America,
annualized gains of around 10%. Similarly, long-term Illinois
government bonds have gained about 5% annually over
this period. And, of course, markets occasionally
suffer significant losses.
No one knows how the financial markets will behave
during the coming year. But this should not affect your
investing strategy, and it will not affect ours. We
launched the three Time Horizon
Portfolios on September 5, 1995, in the middle of the recent rally. Since then,
as the Portfolios' combined gross assets have grown to $34.5 million (as of
January 31, 1996), we have begun to implement their innovative investment
approach.
Our aim is to build the Time Horizon Portfolios into funds that reflect our
belief in the principles of sound investing.
HELPING YOU MEET YOUR GOALS ON TIME
- --First, it's important to keep in mind that investment success isn't about
"beating the market." It is about meeting the series of financial goals that
most of us cherish during our lifetimes. These goals might range from taking a
vacation next summer to paying college tuition in 10 years or securing a
comfortable retirement in 20 or 30 years.
- --Second, the most important question for any investor is this: When will I need
the money to meet my goals? Most of us have both long- and short-term goals. The
behavior of the financial markets over time strongly suggests that such time
horizons are likely to be the most important factor that determines how we
should invest.
For example, if you will need your money next summer, it makes sense to focus on
relatively stable investments. If you have a much longer time horizon, however,
you might wish to invest some of your money in investments that have the
potential to deliver higher returns over long periods -- even though the value
of your investment might fluctuate from year to year.
With that in mind, each of the three Time Horizon Portfolios is designed to help
you invest for your financial goals occurring at a specific date, ranging from
the year 2005 (Time Horizon Portfolio 1) to the year 2015 (Portfolio 2), to the
year 2025 (Portfolio 3). The nearer the target date, the more each Fund's
investments will emphasize capital preservation. For example, Portfolio 1, with
the shortest time horizon, will hold a larger allocation of its assets in
historically more stable investments, such as short-term bonds, while the other
portfolios will normally invest proportionately larger amounts of assets in
stocks.
6
<PAGE> 9
The Time Horizon Funds' portfolios will change over time, unlike the typical
asset allocation fund. So, there's no need to switch your investments as your
time horizon grows shorter. THE FUNDS THEMSELVES WILL CHANGE.
ASSET ALLOCATION DRIVES RESULTS
- --Third, investment gains and losses historically have been determined largely
by how a portfolio's assets are allocated between stocks and bonds. Studies
have found that 90% of an investment's return is determined by the mix of
different asset categories.* The Time Horizon Funds are managed with the goal
of achieving the best mix of stocks and bonds, as is appropriate for each
Fund's stage in its time horizon, over the life of each Fund.
The portfolio manager and his team constantly evaluate the projected returns and
risks from each asset class and adjust the mix for each portfolio to reflect
their conclusions. For example, in its early years, Portfolio 1 has a target
asset allocation of 35% of assets invested in stocks and 65% invested in bonds.
Depending on whether the portfolio manager believes that, in the current market
environment, stocks seem more or less attractive than bonds, the percentage
invested in stocks might rise as high as 45% or drop as low as 15%. By operating
within these guidelines, each Fund will seek to maintain a mix that is
appropriate for its stated time horizon.
- --Fourth, since history teaches that diversification is crucial to sound
investing, each Fund will hold a broad range of different stocks and bonds. By
investing in stocks of small, medium-sized and large companies in a variety of
industries, both in the United States and abroad, as well as in a variety of
U.S. Government bonds and investment-grade corporate bonds, the Funds will
increase their potential for gains while helping to reduce overall risk -- since
losses in one security or industry can be offset, all or in part, by gains in
others.
A DISCIPLINED STRATEGY
- --Fifth, we believe that a disciplined investment process is essential to
long-term success. The managers of the Funds choose the Funds' investments based
on consistent and clear guidelines regarding asset allocation and the selection
of individual stocks and bonds.
The Funds' current holdings reflect the progress we have made toward developing
their portfolios to be appropriate for their target dates, as well as our
assessment of the stock and bond markets today.
Most of all, the Time Horizon Funds reflect a vision of the goals mutual funds
should pursue for investors like you.
All you need to do is to define your goals and your time horizon. That done, we
can spend the next 10, 20 or 30 years balancing the risks and returns in the
financial markets to pursue those goals on your behalf.
Sincerely,
/s/ Patrick C. Lynch
January 31, 1996
- ---------------
*Source: Brinson, Beebower & Hood, 1991.
7
<PAGE> 10
TIME HORIZON PORTFOLIO 1
The net assets of Portfolio 1 grew to nearly $10 million from its inception on
September 5, 1995, through December 31, 1995. During this period of rapid
growth, we began to implement the Fund's strategy by investing in a combination
of stocks, bonds and cash appropriate to the Fund's investment time horizon of
about 10 years.
ASSET ALLOCATION AS OF
12/31/95+
[CHART]
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<S> <C>
U.S. TREASURY NOTES 56
U.S. TREASURY BILLS 13
STOCKS 31
</TABLE>
AN EVOLVING STRATEGY
By the end of December, the Fund was invested as follows: 56% in U.S. Treasury
notes, 31% in stocks and 13% in Treasury bills+. The allocation to Treasury
bills, which are highly liquid, short-term securities, is unusually high due to
the large inflows of new money into the Fund and will likely shrink
substantially during the coming months as we put that money to work in the
financial markets.
During these early months of the Fund's existence, its stock investments were
concentrated in large U.S. companies from a broad range of industries -- such as
General Electric (0.9% of the portfolio) and PepsiCo (0.6%). We choose stocks of
companies that we believe have exceptional growth potential, such as Philip
Morris (0.6%) and Pfizer (0.6%), as well as shares of companies -- such as Exxon
(0.5%) and Citicorp (0.7%) -- that we consider to be undervalued relative to
their assets, earnings potential or other characteristics. We anticipate that
this mix of growth- and value-oriented picks will continue to be characteristic
of the Fund's stock holdings.
<TABLE>
<CAPTION>
==============================================
TOP FIVE HOLDINGS+ PERCENT OF
AS OF 12/31/95 PORTFOLIO
<S> <C>
- ----------------------------------------------
1. General Electric Co. 0.9%
- ----------------------------------------------
2. Mobil Corp. 0.7%
- ----------------------------------------------
3. Citicorp 0.7%
- ----------------------------------------------
4. Ameritech Corp. 0.7%
- ----------------------------------------------
5. PepsiCo Inc. 0.6%
==============================================
</TABLE>
The Fund's fixed-income investments, which currently make up the majority of the
Fund's portfolio, produced a modest 2.99-year average maturity for the fixed-
income portion of the Fund. (The shorter the average maturity, the less
sensitive a portfolio is to changes in interest rates.)
In keeping with our obligation to construct a diversified portfolio, we will
continue to expand the Fund's holdings to include an even broader range of
stocks and bonds. As the Fund's assets grow, we plan to add stocks of
medium-sized U.S. firms as well as shares of international companies. We are
currently aiming to invest roughly 20% of the Fund's assets in stocks of large
U.S. companies, 10% in shares of medium-sized U.S. firms and 5% in foreign
stocks. This allocation may change modestly depending on where we believe we can
find the most value or growth potential. And we will likely add corporate bonds
as well as mortgage-backed securities to the Fund's fixed-income holdings.
+The composition of the Fund's portfolio is subject to change.
8
<PAGE> 11
Regardless of market fluctuations in the months ahead, we will continue to
pursue the portfolio's overriding mission: to help our loyal, long-term
shareholders meet their financial goals occurring around the Fund's target date
of 2005. Our investment strategy will continue to be guided by a commitment to
disciplined, diversified and patient investing that combines the pursuit of
growth with an increasing emphasis on capital preservation.
9
<PAGE> 12
TIME HORIZON PORTFOLIO 2
The net assets of Portfolio 2 grew to $7.5 million from its inception on
September 5, 1995, through December 31, 1995. We invested those assets in a
combination of stocks, bonds and cash as we began to implement the Fund's
long-term strategy.
The Fund's moderately aggressive allocation strategy reflects its primary
mission: to help shareholders invest toward financial goals that will require
use of their money around the target date of 2015. We believe that the
portfolio's horizon of about 20 years will allow time for shareholders to
benefit from potential long-term gains in the stock and bond markets and to ride
out downward fluctuations in the financial markets that may occur.
IMPLEMENTING A UNIQUE
STRATEGY
During the recent period, the Fund's investments began to reflect our long-term
strategy of maintaining a fairly equal allocation between stocks and bonds. As
of December 31, 1995, 43% of the Fund's portfolio was invested in stocks, while
45% was invested in U.S. Treasury notes and 12% was invested in U.S. Treasury
bills+. The Fund's allocation to Treasury bills, which are very liquid,
short-term investments, was high due to the large inflows of new money into the
Fund, but will likely decline as we continue to find opportunities in the stock
and bond markets.
The portfolio's stock investments were devoted primarily to shares of large U.S.
companies -- the likes of General Electric (1.2% of the portfolio) and Exxon
(1.0%) -- from a broad range of industries.
SECTOR DIVERSIFICATION
AS A % OF EQUITY
HOLDINGS AS OF 12/31/95+
[CHART]
<TABLE>
<S> <C>
Transportation 1.2
Basic Industry 8.0
Energy 8.3
Health Care 9.2
Consumer Staples 9.8
Capital Goods 10.4
Technology 12.0
Utilities 12.5
Financial Services 13.9
Consumer Cyclicals 14.7
</TABLE>
For example, at year-end the portfolio had 14.7% of its equity holdings invested
in consumer cyclicals such as auto manufacturers, as well as sizable holdings in
financial services (13.9%), utilities (12.5%) and technology (12.0%).
The stocks in the portfolio include shares of firms chosen on the basis of what
we believe to be exceptional growth potential, such as Johnson & Johnson (0.8%)
and Procter & Gamble (0.8%). But the Fund also holds stocks -- such as Mobil
Corp. (0.9%) -- that we consider to be undervalued relative to their assets,
earnings potential or other characteristics. This combination of growth- and
value-oriented stocks will continue to be characteristic of the Fund's stock
holdings.
<TABLE>
<CAPTION>
==============================================
TOP FIVE HOLDINGS+ PERCENT OF
AS OF 12/31/95 PORTFOLIO
<S> <C>
- ----------------------------------------------
1. General Electric Co. 1.2%
- ----------------------------------------------
2. Exxon Corp. 1.0%
- ----------------------------------------------
3. Mobil Corp. 0.9%
- ----------------------------------------------
4. Bellsouth Corp. 0.9%
- ----------------------------------------------
5. Ameritech Corp. 0.9%
==============================================
</TABLE>
+The composition of the Fund's portfolio is subject to change.
10
<PAGE> 13
As of December 31, 1995, the portfolio's fixed-income holdings consisted
exclusively of U.S. Government securities, which had a modest 3.37-year average
maturity. (The shorter the average maturity, the less sensitive a portfolio is
to changes in interest rates.)
A BROADLY DIVERSIFIED PORTFOLIO
In keeping with our commitment to building a highly diversified portfolio, we
will continue to broaden the Fund's investments in the coming months. As the
Fund's assets continue to grow, we plan to add stocks of medium-sized U.S. firms
as well as shares of international companies. We expect the portfolio's assets
to be allocated as follows: roughly 25% in shares of large U.S. companies, 15%
in shares of medium-sized U.S. firms and 10% in stocks of international
corporations. We also expect to add corporate bonds to round out the Fund's
investment in government securities. These allocations may change modestly if we
discover unusual opportunities in any of these categories.
Regardless of market fluctuations, we will focus on the portfolio's overriding
mission in the months ahead. Our primary objective is to help our loyal,
long-term shareholders meet goals that call for a moderately growth-oriented
investment approach. Our investment strategy will continue to be guided by a
commitment to disciplined, diversified and patient investing that combines the
pursuit of growth with an increasing concern for capital preservation.
11
<PAGE> 14
TIME HORIZON PORTFOLIO 3
The net assets of Portfolio 3 grew to $6.4 million from its inception on
September 5, 1995, through December 31, 1995. We invested those assets in a
combination of stocks, bonds and cash as we began to implement the Fund's
long-term strategy.
In the Fund's early years, our target allocation is to invest 70% of
shareholders' assets in stocks and 30% bonds. We will maintain this allocation
when the two asset groups appear to offer comparable growth potential without
unnecessary risk.
This strategy reflects the Fund's primary mission: to help shareholders invest
toward truly long-term financial goals that will require use of their money
around the target date of 2025. We intend to maintain a portfolio that is nearly
fully invested in the financial markets. This is based upon our belief that the
Fund's 30-year horizon will give shareholders the time to participate in the
markets' long-term growth potential while allowing time to ride out downward
fluctuations in the financial markets that may occur.
INVESTING FOR LONG-TERM GROWTH
As of December 31, 1995, the portfolio was allocated as follows: 55% in stocks
and 45% in a combination of U.S. Treasury notes and bills+. As with the other
Time Horizon Portfolios, the allocation to Treasury securities was high due to
the large amount of new money coming into the Fund. We expect this position to
shrink substantially during the coming months as we find opportunities to put
more money to work long term in the financial markets.
Sector Diversification
as a % of equity
holdings as of 12/31/95+
[CHART]
<TABLE>
<S> <C>
Transportation 1.1
Basic Industry 7.0
Energy 7.5
Health Care 9.5
Consumer Staples 9.9
Capital Goods 10.6
Technology 10.9
Financial Services 14.3
Utilities 14.7
Consumer Cyclicals 14.6
</TABLE>
During these early months, the portfolio's stock investments were largely
devoted to shares of large U.S. companies -- the likes of Sprint (0.8% of the
portfolio) and Walt Disney (0.9%) -- which, together with other stocks held by
the Fund, represent a broad range of industries. For example, at year-end the
portfolio had 14.6% of its equity holdings invested in consumer cyclicals such
as auto manufacturers, as well as sizable holdings in utilities (14.7%),
financial services (14.3%) and consumer staples such as food and drug companies
(9.9%).
We choose stocks of companies on the basis of what we believe to be their
exceptional growth potential, such as semiconductor giant Intel (0.5%) and
consumer goods manufacturer Procter & Gamble (0.5%). But the Fund also holds
stocks of other firms, such as Allstate (0.7%) and United Technologies (0.3%),
that we consider to be undervalued relative to their assets, earnings potential
or other characteristics. We expect that we will continue to maintain a
combination of growth- and value-oriented stocks.
+The composition of the Fund's portfolio is subject to change.
12
<PAGE> 15
<TABLE>
<CAPTION>
===============================================
TOP FIVE HOLDINGS+ PERCENT OF
AS OF 12/31/95 PORTFOLIO
<S> <C>
- -----------------------------------------------
1. General Electric Co. 2.1%
- -----------------------------------------------
2. Ameritech Corp. 2.0%
- -----------------------------------------------
3. PepsiCo Inc. 1.9%
- -----------------------------------------------
4. Merck & Co. 1.5%
- -----------------------------------------------
5. Bank of New York Co. 1.3%
===============================================
</TABLE>
The portfolio's U.S. Government securities holdings represent a modest 2.72-year
average maturity for the fixed-income portion of the Fund. (The shorter the
average maturity, the lower a portfolio's sensitivity to changes in interest
rates.)
INVESTING IN DIFFERENT MARKET SECTORS
As we continue to diversify the portfolio, we will include an even wider range
of stocks and bonds. As the Fund's assets grow, we plan to add shares of medium-
sized U.S. firms and international companies. Currently, we expect the
portfolio's holdings to break down roughly as follows: 40% of the portfolio in
stocks of large U.S. companies, 20% in medium-sized U.S. firms and 10% in
international firms. In addition, to increase yield, we plan to add corporate
bonds as well as mortgage-backed securities to the Fund's bond holdings. These
allocations may change modestly according to where we believe we can find the
greatest value.
Regardless of market fluctuations in the months ahead, we will focus on the
portfolio's overriding mission: to help our loyal, long-term shareholders meet
financial goals occurring around the Fund's target date of 2025. Our investment
strategy will continue to be guided by a commitment to disciplined, diversified
and patient investing that combines the pursuit of growth with an increasing
emphasis on capital preservation.
13
<PAGE> 16
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value...................................... $9,053,007 $7,296,556 $6,227,834
Cash....................................................... 3,546 2,005 3,709
Interest receivable........................................ 54,709 59,999 31,421
Receivable from Investment Adviser......................... 24,790 26,130 15,276
Receivable for capital shares issued....................... 482,749 180,540 157,450
Unamortized organization costs............................. 33,334 33,334 33,334
Prepaid expenses........................................... 46,598 45,236 35,983
----------- ----------- ----------
Total Assets................................................ 9,698,733 7,643,800 6,505,007
----------- ----------- ----------
LIABILITIES:
Capital shares redeemed.................................... 600 76,845 25,500
Accrued expenses and other payables:
Management fees.......................................... 183 156 115
12b-1 fees (Class B Shares).............................. 3,702 2,720 2,326
Organization costs....................................... 33,334 33,334 33,334
Legal and audit fees..................................... 2,197 2,648 963
Other.................................................... 1,937 2,761 1,241
----------- ----------- ----------
Total Liabilities........................................... 41,953 118,464 63,479
----------- ----------- ----------
NET ASSETS:
Capital.................................................... 9,551,413 7,408,648 6,361,432
Accumulated undistributed net investment income/(loss)..... 357 1,995 (233)
Net unrealized appreciation on investments................. 83,880 94,594 66,209
Accumulated undistributed net realized gains on investment
transactions............................................. 21,130 20,099 14,120
----------- ----------- ----------
Net Assets............................................... $9,656,780 $7,525,336 $6,441,528
============ ============ ==========
Net Assets
Class A.................................................... $2,712,240 $2,702,345 $2,041,030
Class B.................................................... 6,944,540 4,822,991 4,400,498
----------- ----------- -----------
Total....................................................... $9,656,780 $7,525,336 $6,441,528
============ ============ ==========
Outstanding units of beneficial interest (shares)
Class A.................................................... 263,020 260,305 195,589
Class B.................................................... 673,482 464,842 421,411
----------- ----------- ----------
Total....................................................... 936,502 725,147 617,000
============ ============ ==========
Net asset value
Class A -- redemption price per share...................... $10.31 $10.38 $10.44
Class B -- offering price per share*....................... 10.31 10.38 10.44
============ ============ ==========
Maximum Sales Charge........................................ 4.50% 4.50% 4.50%
============ ============ ==========
Maximum Offering Price
(100%/(100% - Maximum Sales Charge) of net asset value
adjusted to nearest cent) per share (Class A)............. $10.80 $10.87 $10.93
============ ============ ==========
INVESTMENTS, AT COST........................................ $8,969,127 $7,201,962 $6,161,625
============ ============ ==========
</TABLE>
- ---------------
* Redemption price per share is equal to the net asset value per share less any
applicable redemption fee.
See Notes to Financial Statements.
14
<PAGE> 17
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
------------- ------------- -------------
SEPTEMBER 5, SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995(a) 1995(a) 1995(a)
------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income................ $ 47,567 $ 35,586 $ 20,854
Dividend income................ 6,503 8,819 8,035
------------- ------------- -------------
Total Income................. 54,070(b) 44,405(b) 28,889(b)
------------- ------------- -------------
EXPENSES:
Management fees................ 7,087 6,328 4,240
12b-1 fees (Class B Shares).... 6,322 5,085 3,369
Shareholder Services fees
(Class A and Class B
Shares)...................... 2,952 2,637 1,767
Custodian and accounting
fees......................... 3,015 3,015 3,015
Legal and audit fees........... 7,035 6,700 2,613
Organization costs............. 402 402 402
Trustees' fees................. 1,809 2,144 737
Transfer agent fees............ 2,412 2,345 2,345
Registration and filing fees... 5,360 5,762 4,154
Printing costs................. 3,216 3,886 1,340
Other.......................... 1,539 1,876 669
------------- ------------- -------------
Total Expenses before waivers
and reimbursements......... 41,149 40,180 24,651
Expense waivers and
reimbursements............. 35,060 35,501 21,274
------------- ------------- -------------
Total Expenses............... 6,089 4,679 3,377
------------- ------------- -------------
Net investment income............ 47,981 39,726 25,512
------------- ------------- -------------
REALIZED/UNREALIZED GAINS ON
INVESTMENTS:
Net realized gains on
investment transactions...... 21,130 20,099 14,120
Net change in unrealized
appreciation on
investments.................. 83,880 94,594 66,209
------------- ------------- -------------
Net realized/unrealized gains on
investments.................... 105,010 114,693 80,329
------------- ------------- -------------
Change in net assets resulting
from operations................ $ 152,991 $ 154,419 $ 105,841
============= ============= =============
</TABLE>
- ---------------
(a) Period from commencement of operations.
(b) Includes income earned during the period from July 28, 1995 (initial seed
date) through September 4, 1995 (initial sale of shares to public).
See Notes to Financial Statements.
15
<PAGE> 18
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
------------- ------------- -------------
SEPTEMBER 5, SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995(a) 1995(a) 1995(a)
------------- ------------- -------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.......... $ 47,981(b) $ 39,726(b) $ 25,512(b)
Net realized gains on
investment
transactions................. 21,130 20,099 14,120
Net change in unrealized
appreciation on
investments.................. 83,880 94,594 66,209
------------- ------------- -------------
Change in net assets resulting
from
operations..................... 152,991 154,419 105,841
------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income
Class A Shares................. (15,201) (15,518) (9,276)
Class B Shares................. (32,423) (22,213) (16,469)
------------- ------------- -------------
(47,624) (37,731) (25,745)
------------- ------------- -------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued.... 9,638,721 7,577,360 6,415,507
Dividends reinvested........... 37,988 32,696 21,061
Cost of shares redeemed........ (125,296) (201,408) (75,136)
------------- ------------- -------------
Change in net assets from capital
transactions................... 9,551,413 7,408,648 6,361,432
------------- ------------- -------------
Change in net assets............. 9,656,780 7,525,336 6,441,528
NET ASSETS:
Beginning of period............ -- -- --
------------- ------------- -------------
End of period.................. $ 9,656,780 $ 7,525,336 $ 6,441,528
============= ============= =============
SHARE TRANSACTIONS:
Sold........................... 944,966 741,430 622,150
Reinvested..................... 3,692 3,156 2,022
Redeemed....................... (12,156) (19,439) (7,172)
------------- ------------- -------------
Change in shares................. 936,502 725,147 617,000
============= ============= =============
</TABLE>
- ---------------
(a) Period from commencement of operations.
(b) Includes income earned during the period from July 28, 1995 (initial seed
date) through September 4, 1995 (initial sale of shares to public).
See Notes to Financial Statements.
16
<PAGE> 19
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
COMMON STOCKS -- 28.8%
AUTOMOBILES & TRUCKS -- 0.4%
General Motors Corp. ................................................. 800 $ 42,300
----------
BANKS -- 1.5%
Bank of New York Co., Inc. ........................................... 600 29,250
Citicorp.............................................................. 900 60,526
First Chicago......................................................... 543 21,448
NationsBank Corp. .................................................... 500 34,813
----------
146,037
----------
BEVERAGES -- 0.9%
Coca-Cola Co. ........................................................ 400 29,700
PepsiCo, Inc. ........................................................ 1,000 55,875
----------
85,575
----------
BROADCASTING -- 0.5%
Capital Cities/ABC, Inc. ............................................. 400 49,350
----------
BUILDING MATERIALS -- 0.1%
Armstrong World....................................................... 200 12,400
----------
BUSINESS EQUIP. & SERVICES -- 0.3%
Xerox Corp. .......................................................... 200 27,400
----------
CHEMICALS -- 1.2%
Air Products & Chemicals, Inc. ....................................... 900 47,475
Eastman Chemical Co. ................................................. 400 25,050
E.I. du Pont de Nemours............................................... 200 13,975
Monsanto Co. ......................................................... 200 24,500
----------
111,000
----------
COMPUTER SOFTWARE -- 0.7%
Cisco Systems, Inc.(b)................................................ 400 29,850
Microsoft Corp.(b).................................................... 400 35,100
----------
64,950
----------
COMPUTERS & COMPUTER SYSTEMS -- 1.6%
Compaq Computer Corp.(b).............................................. 500 24,000
Hewlett Packard....................................................... 600 50,250
IBM Corp. ............................................................ 200 18,350
Oracle Corp.(b)....................................................... 600 25,425
Sun Microsystems, Inc. ............................................... 600 27,375
----------
145,400
----------
CONSTRUCTION MATERIALS -- 0.2%
PPG Industries, Inc. ................................................. 500 22,875
----------
</TABLE>
- ---------------
Continued
17
<PAGE> 20
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
DEFENSE -- 1.2%
General Dynamics Corp. ............................................... 600 $ 35,475
Lockheed Martin Corp. ................................................ 300 23,700
Rockwell International Corp. ......................................... 700 37,012
United Technologies Corp. ............................................ 200 18,975
----------
115,162
----------
ELECTRICAL EQUIPMENT -- 0.2%
Honeywell, Inc. ...................................................... 400 19,450
----------
ELECTRONICS & ELECTRONIC COMPONENTS -- 1.7%
Applied Materials, Inc. .............................................. 700 27,563
General Electric Co. ................................................. 1,100 79,200
Intel Corp. .......................................................... 600 34,050
Texas Instruments..................................................... 500 25,875
----------
166,688
----------
ENGINEERING & CONSTRUCTION -- 0.2%
Fluor Corp. .......................................................... 200 13,200
----------
ENTERTAINMENT -- 0.5%
King World Productions(b)............................................. 400 15,550
The Walt Disney Co. .................................................. 600 35,400
----------
50,950
----------
FINANCIAL SERVICES -- 1.0%
Bank of Boston Corp. ................................................. 500 23,125
Dean Witter Discover & Co. ........................................... 400 18,800
First Interstate Bancorp.............................................. 400 54,600
----------
96,525
----------
FOOD & RELATED PRODUCTS -- 1.1%
Campbell Soup Co. .................................................... 300 18,000
ConAgra, Inc. ........................................................ 400 16,500
IBP, Inc. ............................................................ 300 15,150
Philip Morris Co., Inc. .............................................. 600 54,300
----------
103,950
----------
FOREST & PAPER PRODUCTS -- 0.6%
Kimberly-Clark Corp. ................................................. 300 24,825
Mead Corp. ........................................................... 500 26,125
Williamette Industries, Inc. ......................................... 200 11,250
----------
62,200
----------
HOSPITAL SUPPLY & MGMT. -- 0.1%
Columbia HCA Healthcare Corp. ........................................ 200 10,150
----------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.2%
Marriott International................................................ 600 22,950
----------
HOUSEHOLD-GENERAL PRODUCTS -- 0.7%
Newell Co. ........................................................... 600 15,525
Premark International, Inc. .......................................... 400 20,250
Procter & Gamble Co. ................................................. 400 33,200
----------
68,975
----------
</TABLE>
- ---------------
Continued
18
<PAGE> 21
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
INSURANCE -- 1.7%
Aetna Life & Casualty Co. ............................................ 400 $ 27,700
Allstate Insurance.................................................... 800 32,900
General Re Corp. ..................................................... 200 31,000
Providian Corp. ...................................................... 900 36,675
Travelers Group, Inc. ................................................ 500 31,438
----------
159,713
----------
MANUFACTURING -- 0.6%
Illinois Tool Works................................................... 500 29,500
Johnson Controls...................................................... 400 27,500
----------
57,000
----------
MEDICAL -- BIOTECHNOLOGY -- 0.2%
Medtronic, Inc. ...................................................... 400 22,350
----------
MEDICAL -- HOSP. MGT. & SVC. -- 0.3%
United Healthcare Corp. .............................................. 400 26,200
----------
METAL FABRICATION -- 0.4%
Aluminum Co. of America............................................... 400 21,150
Kennametal, Inc. ..................................................... 500 15,875
----------
37,025
----------
METALS -- DIVERSIFIED -- 0.1%
Phelps Dodge Corp. ................................................... 200 12,450
----------
MULTIPLE INDUSTRY -- 0.4%
ITT Destinations, Inc.(b)............................................. 300 15,900
ITT Hartford Group, Inc.(b)........................................... 300 14,513
ITT Industries, Inc. ................................................. 300 7,200
----------
37,613
----------
OIL & GAS -- 0.8%
Atlantic Richfield Co. ............................................... 200 22,150
Consolidated Natural Gas Co. ......................................... 400 18,150
Royal Dutch Petroleum................................................. 200 28,225
Williams Companies, Inc. ............................................. 200 8,775
----------
77,300
----------
PETROLEUM - INTERNATIONALS & SERVICES -- 1.8%
Amoco Corp. .......................................................... 200 14,375
Exxon Corp. .......................................................... 600 48,075
Halliburton Co. ...................................................... 900 45,562
Mobil Corp. .......................................................... 600 67,200
----------
175,212
----------
PHARMACEUTICALS -- 1.8%
Bristol-Myers Squibb Co. ............................................. 400 34,350
Johnson & Johnson..................................................... 500 42,812
Merck & Co., Inc. .................................................... 600 39,450
Pfizer, Inc. ......................................................... 800 50,400
Schering-Plough....................................................... 200 10,950
----------
177,962
----------
PHOTOGRAPHIC EQUIPMENT -- 0.1%
Eastman Kodak Co. .................................................... 200 13,400
----------
</TABLE>
- ---------------
Continued
19
<PAGE> 22
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
PUBLISHING -- 0.5%
Dow Jones & Co., Inc. ................................................ 500 $ 19,937
Tribune Co. .......................................................... 400 24,450
----------
44,387
----------
RAILROAD -- 0.3%
Norfolk Southern Corp. ............................................... 400 31,750
----------
RETAIL -- 1.3%
The Gap, Inc. ........................................................ 400 16,800
Home Depot, Inc. ..................................................... 800 38,300
Kroger Co.(b)......................................................... 200 7,500
Safeway, Inc.(b)...................................................... 400 20,600
Sears Roebuck & Co. .................................................. 900 35,100
----------
118,300
----------
SHOES - LEATHER -- 0.1%
Nike, Inc., Class B................................................... 200 13,925
----------
TIRES & RUBBER PRODUCTS -- 0.3%
Goodyear Tire & Rubber Co. ........................................... 600 27,225
----------
TRANSPORTATION - AIR -- 0.1%
AMR Corp.(b).......................................................... 100 7,425
----------
UTILITIES - ELECTRIC -- 1.1%
Detroit Edison Co. ................................................... 900 31,050
FPL Group, Inc. ...................................................... 500 23,187
General Public Utilities Corp. ....................................... 500 17,000
Unicom Corp. ......................................................... 1,000 32,750
----------
103,987
----------
UTILITIES - TELEPHONE -- 2.0%
Ameritech Corp. ...................................................... 1,000 59,000
AT&T Corp. ........................................................... 400 25,900
Bellsouth Corp. ...................................................... 1,000 43,500
Southwestern Bell Corp. .............................................. 500 28,750
Sprint Corp. ......................................................... 1,000 39,875
----------
197,025
----------
Total Common Stocks.................................................... 2,777,736
----------
U.S. TREASURY BILLS -- 12.5%
2/22/96............................................................... 1,221,000 1,211,332
----------
Total U.S. Treasury Bills.............................................. 1,211,332
----------
</TABLE>
- ---------------
Continued
20
<PAGE> 23
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION VALUE
- ----------------------------------------------------------------------- ----------
<S> <C> <C>
U.S. TREASURY NOTES -- 52.4%
6.13%, 5/31/97........................................................ 650,000 658,047
6.75%, 5/31/99........................................................ 2,260,000 2,360,231
6.25%, 8/31/00........................................................ 1,977,000 2,045,661
----------
Total U.S. Treasury Notes.............................................. $5,063,939
----------
TOTAL (COST $8,969,127)(a)............................................. $9,053,007
==========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $9,656,780
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $126,770
Unrealized depreciation........................................ (42,890)
--------
Net unrealized appreciation.................................... $ 83,880
========
</TABLE>
(b) Represents non-income producing securities.
See Notes to Financial Statements.
21
<PAGE> 24
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
COMMON STOCKS -- 41.9%
AUTOMOBILES & TRUCKS -- 0.6%
General Motors Corp. ................................................. 900 $ 47,588
----------
BANKS -- 2.2%
Bank of New York Co., Inc. ........................................... 800 39,000
Citicorp.............................................................. 700 47,075
First Chicago......................................................... 724 28,598
NationsBank Corp. .................................................... 700 48,738
----------
163,411
----------
BEVERAGES -- 1.4%
Coca-Cola Co. ........................................................ 500 37,125
PepsiCo, Inc. ........................................................ 1,200 67,050
----------
104,175
----------
BROADCASTING -- 0.7%
Capital Cities/ABC, Inc. ............................................. 400 49,350
----------
BUILDING MATERIALS -- 0.2%
Armstrong World....................................................... 200 12,400
----------
BUSINESS EQUIP. & SERVICES -- 0.4%
Xerox Corp. .......................................................... 200 27,400
----------
CHEMICALS -- 1.8%
Air Products & Chemicals, Inc. ....................................... 900 47,475
Eastman Chemical Co. ................................................. 400 25,050
E.I. du Pont de Nemours............................................... 400 27,950
Monsanto Co. ......................................................... 300 36,750
----------
137,225
----------
COMPUTER SOFTWARE -- 1.1%
Cisco Systems, Inc.(b)................................................ 500 37,313
Microsoft Corp.(b) ................................................... 500 43,875
----------
81,188
----------
COMPUTER SYSTEMS/HARDWARE -- 2.3%
Compaq Computer Corp.(b).............................................. 500 24,000
Hewlett Packard....................................................... 600 50,250
IBM Corp. ............................................................ 400 36,700
Oracle Corp.(b)....................................................... 800 33,900
Sun Microsystems, Inc. ............................................... 600 27,375
----------
172,225
----------
CONSTRUCTION MATERIALS -- 0.3%
PPG Industries, Inc. ................................................. 500 22,875
----------
</TABLE>
- ---------------
Continued
22
<PAGE> 25
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
DEFENSE -- 1.8%
General Dynamics Corp. ............................................... 600 $ 35,475
Lockheed Martin Corp. ................................................ 300 23,700
Rockwell International Corp. ......................................... 700 37,013
United Technologies Corp. ............................................ 400 37,950
----------
134,138
----------
ELECTRICAL EQUIPMENT -- 0.1%
Honeywell, Inc. ...................................................... 200 9,725
----------
ELECTRONICS & ELECTRONIC COMPONENTS -- 2.5%
Applied Materials, Inc. .............................................. 700 27,563
General Electric Co. ................................................. 1,200 86,400
Intel Corp. .......................................................... 800 45,400
Texas Instruments .................................................... 500 25,875
----------
185,238
----------
ENGINEERING & CONSTRUCTION -- 0.3%
Fluor Corp. .......................................................... 300 19,800
----------
ENTERTAINMENT -- 0.9%
King World Productions(b)............................................. 500 19,438
The Walt Disney Co. .................................................. 800 47,200
----------
66,638
----------
FINANCIAL SERVICES -- 1.7%
Bank of Boston Corp. ................................................. 800 37,000
Dean Witter Discover & Co. ........................................... 700 32,900
First Interstate Bancorp.............................................. 400 54,600
----------
124,500
----------
FOOD & RELATED -- 1.7%
Campbell Soup Co. .................................................... 500 30,000
ConAgra, Inc. ........................................................ 500 20,625
IBP, Inc. ............................................................ 300 15,150
Philip Morris Co., Inc. .............................................. 700 63,350
----------
129,125
----------
FOREST & PAPER PRODUCTS -- 0.7%
Kimberly-Clark Corp. ................................................. 200 16,550
Mead Corp. ........................................................... 500 26,125
Williamette Industries, Inc. ......................................... 200 11,250
----------
53,925
----------
HOSPITAL SUPPLY & MGMT. -- 0.2%
Columbia HCA Healthcare Corp. ........................................ 300 15,225
----------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.3%
Marriott International................................................ 600 22,950
----------
HOUSEHOLD - GENERAL PRODUCTS -- 1.0%
Newell Co. ........................................................... 400 10,350
Premark International, Inc. .......................................... 200 10,125
Procter & Gamble Co. ................................................. 700 58,100
----------
78,575
----------
</TABLE>
- ---------------
Continued
23
<PAGE> 26
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
INSURANCE -- 2.0%
Aetna Life & Casualty Co. ............................................ 400 $ 27,700
Allstate Insurance.................................................... 1,300 53,462
General Re Corp. ..................................................... 200 31,000
Providian Corp. ...................................................... 700 28,525
Travelers Group, Inc. ................................................ 200 12,575
----------
153,262
----------
MANUFACTURING -- 0.7%
Illinois Tool Works................................................... 400 23,600
Johnson Controls...................................................... 400 27,500
----------
51,100
----------
MEDICAL -- BIOTECHNOLOGY -- 0.3%
Medtronic, Inc. ...................................................... 400 22,350
----------
METAL FABRICATION -- 0.5%
Aluminum Co. of America............................................... 400 21,150
Kennametal, Inc. ..................................................... 500 15,875
----------
37,025
----------
METALS -- 0.2%
Phelps Dodge Corp. ................................................... 300 18,675
----------
MULTIPLE INDUSTRY -- 0.6%
ITT Destinations, Inc.(b)............................................. 400 21,200
ITT Hartford Group, Inc.(b)........................................... 400 19,350
ITT Industries, Inc. ................................................. 400 9,600
----------
50,150
----------
OIL & GAS -- 1.1%
Atlantic Richfield Co. ............................................... 200 22,150
Consolidated Natural Gas Co. ......................................... 400 18,150
Royal Dutch Petroleum................................................. 200 28,225
Williams Companies, Inc. ............................................. 300 13,162
----------
81,687
----------
PETROLEUM - INTERNATIONALS & SERVICES -- 2.8%
Amoco Corp. .......................................................... 400 28,750
Exxon Corp. .......................................................... 900 72,112
Halliburton Co. ...................................................... 900 45,563
Mobil Corp. .......................................................... 600 67,200
----------
213,625
----------
PHARMACEUTICALS -- 3.0%
Bristol-Myers Squibb Co. ............................................. 600 51,525
Johnson & Johnson..................................................... 700 59,937
Merck & Co., Inc. .................................................... 700 46,025
Pfizer, Inc. ......................................................... 900 56,700
Schering-Plough....................................................... 200 10,950
----------
225,137
----------
PHOTOGRAPHIC EQUIPMENT -- 0.3%
Eastman Kodak Co. .................................................... 300 20,100
----------
PUBLISHING -- 0.6%
Dow Jones & Co., Inc. ................................................ 500 19,937
Tribune Co. .......................................................... 500 30,563
----------
50,500
----------
</TABLE>
- ---------------
Continued
24
<PAGE> 27
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
RAILROAD -- 0.4%
Norfolk Southern Corp. ............................................... 400 $ 31,750
----------
RETAIL -- 1.7%
The Gap, Inc. ........................................................ 400 16,800
Home Depot, Inc. ..................................................... 900 43,087
Kroger Co.(b)......................................................... 300 11,250
Safeway, Inc.(b)...................................................... 300 15,450
Sears Roebuck & Co. .................................................. 1,100 42,900
----------
129,487
----------
SHOES - LEATHER -- 0.3%
Nike, Inc., Class B................................................... 300 20,887
----------
TIRES & RUBBER PRODUCTS -- 0.2%
Goodyear Tire & Rubber Co. ........................................... 400 18,150
----------
TRANSPORTATION - AIR -- 0.1%
AMR Corp.(b).......................................................... 100 7,425
----------
UTILITIES - ELECTRIC -- 1.7%
Detroit Edison Co. ................................................... 900 31,050
FPL Group, Inc. ...................................................... 900 41,737
General Public Utilities Corp. ....................................... 700 23,800
Unicom Corp. ......................................................... 900 29,475
----------
126,062
----------
UTILITIES - TELEPHONE -- 3.2%
Ameritech Corp. ...................................................... 1,100 64,900
AT&T Corp. ........................................................... 600 38,850
Bellsouth Corp. ...................................................... 1,500 65,250
Southwestern Bell Corp. .............................................. 400 23,000
Sprint Corp. ......................................................... 1,200 47,850
----------
239,850
----------
Total Common Stocks.................................................... 3,154,898
----------
U.S. TREASURY BILLS -- 11.4%
1/18/96............................................................... 11,000 10,971
2/22/96............................................................... 850,000 843,283
----------
Total U.S. Treasury Bills............................................. 854,254
----------
U.S. TREASURY NOTES -- 43.7%
6.13%, 5/31/97........................................................ 460,000 465,695
6.25%, 8/31/00........................................................ 2,727,000 2,821,709
----------
Total U.S. Treasury Notes.............................................. 3,287,404
----------
TOTAL (COST $7,201,962)(a)............................................. $7,296,556
==========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $7,525,336.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $142,456
Unrealized depreciation....................................... (47,862)
--------
Net unrealized appreciation................................... $ 94,594
========
</TABLE>
(b) Represents non-income producing securities.
See Notes to Financial Statements.
25
<PAGE> 28
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
COMMON STOCKS -- 53.1%
AUTOMOBILES & TRUCKS -- 0.9%:
General Motors Corp. ................................................. 1,100 $ 58,163
---------
BANKS -- 3.5%
Bank of New York Co., Inc. ........................................... 1,700 82,875
Citicorp.............................................................. 1,000 67,250
First Chicago......................................................... 905 35,747
NationsBank Corp. .................................................... 600 41,775
---------
227,647
---------
BEVERAGES -- 2.3%
Coca-Cola Co. ........................................................ 400 29,700
PepsiCo, Inc. ........................................................ 2,100 117,337
---------
147,037
---------
BROADCASTING -- 0.8%
Capital Cities/ABC, Inc. ............................................. 400 49,350
---------
BUILDING MATERIALS -- 0.2%
Armstrong World....................................................... 200 12,400
---------
BUSINESS EQUIP. & SERVICES -- 0.4%
Xerox Corp. .......................................................... 200 27,400
---------
CHEMICALS -- 2.0%
Air Products & Chemicals, Inc. ....................................... 900 47,475
Eastman Chemical Co. ................................................. 700 43,837
E.I. du Pont de Nemours............................................... 200 13,975
Monsanto Co. ......................................................... 200 24,500
---------
129,787
---------
COMPUTER SOFTWARE -- 0.9%
Cisco Systems, Inc.(b)................................................ 400 29,850
Microsoft Corp.(b).................................................... 300 26,325
---------
56,175
---------
COMPUTERS -- 2.5%
Compaq Computer Corp.(b).............................................. 1,000 48,000
Hewlett Packard....................................................... 600 50,250
IBM Corp. ............................................................ 200 18,350
Oracle Corp.(b)....................................................... 400 16,950
Sun Microsystems, Inc. ............................................... 600 27,375
---------
160,925
---------
CONSTRUCTION MATERIALS -- 0.4%
PPG Industries, Inc. ................................................. 500 22,875
---------
</TABLE>
- ---------------
Continued
26
<PAGE> 29
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- ----- ---------
<S> <C> <C>
DEFENSE -- 1.8%
General Dynamics Corp. ............................................... 600 $ 35,475
Lockheed Martin Corp. ................................................ 300 23,700
Rockwell International Corp. ......................................... 700 37,012
United Technologies Corp. ............................................ 200 18,975
---------
115,162
---------
ELECTRICAL EQUIPMENT -- 0.4%
Honeywell, Inc. ...................................................... 500 24,312
---------
ELECTRONICS -- 4.0%
Applied Materials, Inc. .............................................. 700 27,562
General Electric Co. ................................................. 1,800 129,600
Intel Corp. .......................................................... 500 28,375
Texas Instruments..................................................... 1,400 72,450
---------
257,987
---------
ENGINEERING & CONSTRUCTION -- 0.3%
Fluor Corp. .......................................................... 300 19,800
---------
ENTERTAINMENT -- 1.0%
King World Productions(b)............................................. 300 11,662
The Walt Disney Co. .................................................. 900 53,100
---------
64,762
---------
FINANCIAL SERVICES -- 1.4%
Bank of Boston Corp. ................................................. 400 18,500
Dean Witter Discover & Co. ........................................... 400 18,800
First Interstate Bancorp.............................................. 400 54,600
---------
91,900
---------
FOOD & RELATED PRODUCTS -- 1.8%
Campbell Soup Co. .................................................... 400 24,000
ConAgra, Inc. ........................................................ 500 20,625
IBP, Inc. ............................................................ 300 15,150
Philip Morris Co., Inc. .............................................. 600 54,300
---------
114,075
---------
FOREST & PAPER PRODUCTS -- 0.8%
Kimberly-Clark Corp. ................................................. 200 16,550
Mead Corp. ........................................................... 500 26,125
Williamette Industries, Inc. ......................................... 200 11,250
---------
53,925
---------
HOSPITAL SUPPLY & MGMT. -- 0.2%
Columbia HCA Healthcare Corp. ........................................ 200 10,150
---------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.4%
Marriott International................................................ 600 22,950
---------
HOUSEHOLD - GENERAL PRODUCTS -- 1.2%
Newell Co. ........................................................... 600 15,525
Premark International, Inc. .......................................... 600 30,375
Procter & Gamble Co. ................................................. 400 33,200
---------
79,100
---------
</TABLE>
- ---------------
Continued
27
<PAGE> 30
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- ----- ---------
<S> <C> <C>
INSURANCE -- 2.6%
Aetna Life & Casualty Co. ............................................ 400 $ 27,700
Allstate Insurance.................................................... 1,000 41,125
General Re Corp. ..................................................... 200 31,000
Providian Corp. ...................................................... 900 36,675
Travelers Group, Inc. ................................................ 500 31,438
---------
167,938
---------
MANUFACTURING -- 1.0%
Illinois Tool Works................................................... 600 35,400
Johnson Controls...................................................... 400 27,500
---------
62,900
---------
MEDICAL - BIOTECHNOLOGY -- 0.3%
Medtronic, Inc. ...................................................... 400 22,350
---------
MEDICAL - HOSP. MGT. & SVC. -- 0.4%
United Healthcare Corp. .............................................. 400 26,200
---------
METAL FABRICATION -- 0.6%
Aluminum Co. of America............................................... 400 21,150
Kennametal, Inc. ..................................................... 500 15,875
---------
37,025
---------
METALS -- DIVERSIFIED -- 0.2%
Phelps Dodge Corp. ................................................... 200 12,450
---------
MULTIPLE INDUSTRY -- 0.4%
ITT Destinations, Inc.(b)............................................. 200 10,600
ITT Hartford Group, Inc.(b)........................................... 200 9,675
ITT Industries, Inc. ................................................. 200 4,800
---------
25,075
---------
OIL & GAS -- 1.2%
Atlantic Richfield Co. ............................................... 200 22,150
Consolidated Natural Gas Co. ......................................... 400 18,150
Royal Dutch Petroleum................................................. 200 28,225
Williams Companies, Inc. ............................................. 200 8,775
---------
77,300
---------
PETROLEUM - INTERNATIONALS -- 3.2%
Amoco Corp. .......................................................... 400 28,750
Exxon Corp. .......................................................... 800 64,100
Halliburton Co. ...................................................... 900 45,563
Mobil Corp. .......................................................... 600 67,200
---------
205,613
---------
PHARMACEUTICALS -- 4.1%
Bristol-Myers Squibb Co. ............................................. 400 34,350
Johnson & Johnson..................................................... 500 42,813
Merck & Co., Inc. .................................................... 1,400 92,050
Pfizer, Inc. ......................................................... 1,200 75,600
Schering-Plough....................................................... 300 16,425
---------
261,238
---------
PHOTOGRAPHIC EQUIPMENT -- 0.3%
Eastman Kodak Co. .................................................... 300 20,100
---------
</TABLE>
- ---------------
Continued
28
<PAGE> 31
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- ----- ---------
<S> <C> <C>
PUBLISHING -- 0.7%
Dow Jones & Co., Inc. ................................................ 500 $ 19,938
Tribune Co. .......................................................... 400 24,450
---------
44,388
---------
RAILROAD -- 0.5%
Norfolk Southern Corp. ............................................... 400 31,750
---------
RETAIL -- 2.7%
The Gap, Inc. ........................................................ 500 21,000
Home Depot, Inc. ..................................................... 900 43,088
Kroger Co.(b)......................................................... 700 26,250
Safeway, Inc.(b)...................................................... 200 10,300
Sears Roebuck & Co. .................................................. 2,000 78,000
---------
178,638
---------
SHOES -- LEATHER -- 0.2%
Nike, Inc., Class B................................................... 200 13,925
---------
TIRES & RUBBER PRODUCTS -- 0.1%
Goodyear Tire & Rubber Co. ........................................... 200 9,075
---------
TRANSPORTATION - AIR -- 0.1%
AMR Corp.(b).......................................................... 100 7,425
---------
UTILITIES - ELECTRIC -- 2.5%
Detroit Edison Co. ................................................... 900 31,050
FPL Group, Inc. ...................................................... 700 32,463
General Public Utilities Corp. ....................................... 1,700 57,800
Unicom Corp. ......................................................... 1,300 42,575
---------
163,888
---------
UTILITIES - TELEPHONE -- 4.8%
Ameritech Corp. ...................................................... 2,100 123,900
AT&T Corp. ........................................................... 500 32,375
Bellsouth Corp. ...................................................... 1,600 69,600
Southwestern Bell Corp. .............................................. 500 28,750
Sprint Corp. ......................................................... 1,300 51,838
---------
306,463
---------
Total Common Stocks.................................................... 3,419,623
---------
U.S. TREASURY BILLS -- 18.4%
2/22/96............................................................... 1,194,000 1,184,311
---------
Total U.S. Treasury Bills.............................................. 1,184,311
---------
</TABLE>
- ---------------
Continued
29
<PAGE> 32
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
U.S. TREASURY NOTES -- 25.2%
6.13%, 5/31/97........................................................ 250,000 $ 253,095
6.25%, 8/31/00........................................................ 985,000 1,019,209
6.38%, 8/15/02........................................................ 335,000 351,596
---------
Total U.S. Treasury Notes.............................................. 1,623,900
---------
TOTAL (COST -- $6,161,625)(a).......................................... $6,227,834
=========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $6,441,528
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $114,395
Unrealized depreciation....................................... (48,186)
--------
Net unrealized appreciation................................... $ 66,209
========
</TABLE>
(b) Represents non-income producing securities.
See Notes to Financial Statements.
30
<PAGE> 33
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Time Horizon Funds (the "Company") was organized on April 12, 1995 as an
open-end management investment company established as a Delaware business trust
and is registered under the Investment Company Act of 1940 (the "1940 Act").
Between the date of organization and the date of initial sale of shares to the
public, the Company had no operations other than incurring organizational
expenses, the sale of initial units of beneficial interest ("shares") and the
realization of income earned on the seed money. The Company offers shares of the
following funds: Time Horizon Portfolio 1 ("Portfolio 1"), Time Horizon
Portfolio 2 ("Portfolio 2"), and Time Horizon Portfolio 3 ("Portfolio 3")
(individually, a "Fund" and collectively, the "Funds"), each of which offers
Class A and Class B shares. Class A shares are offered at net asset value plus
an initial sales charge and are subject to a shareholder servicing fee. Class B
shares are offered at net asset value without a sales charge but are subject to
a contingent deferred sales charge, plus distribution plan and shareholder
servicing fees. Class B shares will convert to Class A shares on the first
business day of the month following the eighth anniversary of the date of
purchase.
NOTE 2 -- SIGNIFICANT ACCOUNTANT POLICIES
The following is a summary of significant accounting policies followed by
the Company in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses for the period. Actual results
could differ from those estimates.
SECURITIES VALUATION:
Investments in securities that are primarily traded on a domestic exchange
or traded on the NASDAQ National Market System are valued at the last sale price
on the exchange or market where primarily traded or listed or if there is no
recent sale price available, at the last current bid quotation. Securities not
so traded are valued at the last current bid quotation if market quotations are
available. Except for short-term securities with remaining maturities of 60 days
or less ("Short-Term Securities"), fixed income securities are valued by using
market quotations, or independent pricing services that use prices provided by
market makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Short-Term Securities
are valued at amortized cost, which approximates market value.
Investments in investment companies are valued at their net asset values as
reported by such companies. Other securities for which quotations are not
readily available are valued at their fair value under procedures established by
the Company's Board of Trustees. The differences
31
<PAGE> 34
between the cost and market values of investments held by the Funds are
reflected as either unrealized appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the accrual
basis and includes, where applicable, the amortization of premium or discount.
Dividend income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the
security lot sold with the net proceeds of sales.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from financial institutions such
as banks and broker dealers which Bank of America National Trust and Saving
Association ("Bank of America" or the "Manager") deems creditworthy under
guidelines approved by the Board of Trustees, subject to the seller's agreement
to repurchase such securities at a mutually agreed-upon date and price. The
repurchase price generally equals the price paid by each Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller, under a
repurchase agreement, is required to maintain the value of collateral held
pursuant to the agreement at 102% of the repurchase price (including accrued
interest). If the seller defaulted on its repurchase obligation, a Fund would
suffer a loss to the extent that the proceeds from a sale of the underlying
securities were less than the repurchase price under the agreement. Bankruptcy
or insolvency of such a defaulting seller may cause the particular Fund's rights
with respect to such securities be delayed or limited. Securities subject to
repurchase agreements are held by the Funds' custodian or another qualified
custodian or in the Federal Reserve/ Treasury book-entry system. Repurchase
agreements are considered to be loans by the Funds under the 1940 Act.
ORGANIZATION EXPENSES:
All costs incurred by the Company in connection with the organization of the
Funds and the initial public offering of shares of the Funds, principally
professional fees and printing, have been deferred. Upon commencement of
investment operations of each Fund, the deferred organization expenses are being
amortized on a straight-line basis over a period of five years. In the event
that any of the initial shares of the Funds are redeemed during the amortization
period by any holder thereof, the redemption proceeds will be reduced by any
unamortized organization expenses in the same proportion as the number of said
shares being redeemed bears to the number of initial shares that are outstanding
at the time of the redemption.
OTHER:
Expenses that are directly related to one of the Funds are charged directly
to that Fund and are allocated to each class of shares based on the relative net
assets of each class. Other operating expenses of the Company are prorated to
the Funds on the basis of relative net assets.
32
<PAGE> 35
NOTE 3 -- PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
period from September 5, 1995 (commencement of operations) through December 31,
1995 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- ----------
<S> <C> <C>
Portfolio 1.............. $11,821,011 $4,090,381
Portfolio 2.............. 8,862,239 2,551,809
Portfolio 3.............. 5,877,313 916,298
</TABLE>
NOTE 4 -- DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income are declared and paid annually and
distributable net realized capital gains, if any, are declared and distributed
at least annually for Class A Shares and Class B Shares of the Funds.
Dividends from net investment income and net realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
NOTE 5 -- FEDERAL INCOME TAXES
It is the policy of each of the Funds to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies, as defined in applicable sections of the Internal Revenue Code, and
to make distributions of net investment income and net realized capital gains
sufficient to relieve it from all, or substantially all, Federal income taxes.
NOTE 6 -- RELATED PARTY TRANSACTIONS
Bank of America National Trust and Savings Association ("Bank of America")
serves as the Funds' Manager. Bank of America is a subsidiary of BankAmerica
Corporation, a registered bank holding company. Under the terms of the
management agreement with the Company, Bank of America is entitled to receive
fees based on a percentage of the average net assets of each Fund.
Pursuant to the authority granted in its management agreement, Bank of
America has entered into a Sub-Administration Agreement with BISYS Fund
Services, Inc. ("BISYS"), under which BISYS will perform certain of the services
to be provided under the management agreement.
Concord Financial Group, Inc. (the "Distributor") serves as distributor of
the Funds' shares. BISYS Fund Services Ohio, Inc. serves as fund accountant and
transfer and dividend disbursing agent of the Funds. BISYS, BISYS Fund Services
Ohio, Inc. and the Distributor are each wholly-owned subsidiaries of The BISYS
Group, Inc. For the period from September 5, 1995 through December 31, 1995,
BISYS received $259,745 from commissions earned on sales of shares of the Fund,
none of which was reallowed to other broker/dealers.
The Company has adopted a Shareholder Service Plan for Class A shares and
Class B shares, under which the Class A shares and Class B shares of the Funds
reimburse the Distributor and Service Organizations for shareholder servicing
fees incurred. Under the Shareholder Service Plan, payments by a Fund for
shareholder servicing expenses may not exceed an annual rate of 0.25% of the
Fund's average daily net assets. The Company has also adopted a Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act, under which the Class B shares
of each Fund compensate the Distributor for services rendered and costs incurred
in connection with distribution of the Class B shares.
33
<PAGE> 36
Under the Distribution Plan, payments by the Class B shares of a Fund for
distribution expenses are incurred at the annual rate of 0.75% of the average
daily net assets of the Fund attributable to the Class B shares.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in those capacities.
Bank of America has agreed to voluntarily reduce its fees, absorb and/or
reimburse operating expenses for the first twelve months of the Funds'
operations to ensure that the operating expenses for each Fund do not exceed
1.00% and 1.75% (annualized) of the average net assets of each Fund's Class A
and Class B Shares, respectively.
Information regarding related party transactions is as follows for the
period from September 5, 1995 (commencement of operations) to December 31, 1995:
<TABLE>
<CAPTION>
PORTFOLIO PORTFOLIO PORTFOLIO
1 2 3
-------- --------- ---------
<S> <C> <C> <C>
MANAGEMENT FEES:
Annual fee before voluntary fee reductions (percentage of average net
assets)................................................................ .60% .60% .60%
Voluntary fee reductions................................................ $ 6,881 $ 6,152 $ 4,114
12b-1 FEES:
Annual fee before voluntary fee reductions (percentage of average net
assets)................................................................ .75% .75% .75%
Voluntary fee reductions................................................ $ 437 $ 582 $ 117
SHAREHOLDER SERVICES FEES:
Annual fee before voluntary fee reductions (percentage of average net
assets)................................................................ .25% .25% .25%
Voluntary fee reductions (Class A)...................................... $ 845 $ 942 $ 644
Voluntary fee reductions (Class B)...................................... $ 2,107 $ 1,695 $ 1,123
EXPENSES REIMBURSED:.................................................... $24,790 $26,130 $15,276
TRANSFER AGENT FEES:.................................................... $ 2,412 $ 2,345 $ 2,345
</TABLE>
NOTE 7 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Funds are summarized below (amounts
in thousands):
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------------------- ----------------------- -----------------------
SEPTEMBER 5, 1995 SEPTEMBER 5, 1995 SEPTEMBER 5, 1995
TO TO TO
DECEMBER 31, 1995(a) DECEMBER 31, 1995(a) DECEMBER 31, 1995(a)
----------------------- ----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares
Issued................... 270 $2,753 274 $2,808 195 $2,006
Reinvested............... 1 13 1 14 1 7
Redeemed................. (8) (84) (15) (158) -- (3)
-- -- --
------ ------ ------
Net increase -- Class A..... 263 2,682 260 2,664 196 2,010
-- -- --
------ ------ ------
Class B Shares
Issued................... 675 6,886 467 4,770 427 4,409
Reinvested............... 3 25 2 18 1 14
Redeemed................. (4) (42) (4) (43) (7) (72)
-- -- --
------ ------ ------
Net increase -- Class B..... 674 6,869 465 4,745 421 4,351
-- -- --
------ ------ ------
Net increase in Fund........ 937 $9,551 725 $7,409 617 $6,361
======= ======== ======= ======== ======= ========
</TABLE>
- ---------------
(a) Period from commencement of operations.
34
<PAGE> 37
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1
------------------------------
CLASS A CLASS B
------------ ------------
SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO
DECEMBER 31, DECEMBER 31,
1995(a) 1995(a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $10.04(d) $10.04(d)
------ ------
Investment Activities:
Net investment income.............................. 0.06 0.05
Net realized and unrealized gains on investments... 0.27 0.27
------ ------
Total from Investment Activities................. 0.33 0.32
------ ------
Distributions:
Net investment income.............................. (0.06) (0.05)
------ ------
NET ASSET VALUE, END OF PERIOD....................... $10.31 $10.31
============ ============
Total Return (excludes sales and redemption charges)
(b)................................................ 3.27% 3.19%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000).................. $2,712 $6,945
Ratio of expenses to average net assets (c)........ 0.02% 0.72%
Ratio of net investment income to average net
assets (c)....................................... 4.54% 3.87%
Ratio of expenses to average net assets (c)*....... 2.98% 3.72%
Ratio of net investment income to average net
assets (c)*...................................... 1.58% 0.87%
Portfolio turnover**............................... 85.33% 85.33%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Net asset value includes the effect of income earned on initial seed money
for the period from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to public).
See Notes to Financial Statements.
35
<PAGE> 38
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 2
------------------------------
CLASS A CLASS B
------------ ------------
SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO
DECEMBER 31, DECEMBER 31,
1995(a) 1995(a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $10.04(d) $10.04(d)
------ ------
Investment Activities:
Net investment income.............................. 0.06 0.05
Net realized and unrealized gains on investments... 0.34 0.34
------ ------
Total from Investment Activities................. 0.40 0.39
------ ------
Distributions:
Net investment income.............................. (0.06) (0.05)
------ ------
NET ASSET VALUE, END OF PERIOD....................... $10.38 $10.38
============ ============
Total Return (excludes sales and redemption charges)
(b)................................................ 3.97% 3.78%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000).................. $2,702 $4,823
Ratio of expenses to average net assets (c)........ 0.02% 0.68%
Ratio of net investment income to average net
assets (c)....................................... 4.16% 3.55%
Ratio of expenses to average net assets (c)*....... 3.35% 4.10%
Ratio of net investment income to average net
assets (c)*...................................... 0.83% 0.13%
Portfolio turnover**............................... 59.79% 59.79%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Net asset value includes the effect of income earned on initial seed money
for the period from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to public).
See Notes to Financial Statements.
36
<PAGE> 39
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 3
------------------------------
CLASS A CLASS B
------------ ------------
SEPTEMBER 5, SEPTEMBER 5,
1995 TO 1995 TO
DECEMBER 31, DECEMBER 31,
1995(a) 1995(a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $10.04(d) $10.04(d)
------ ------
Investment Activities:
Net investment income.............................. 0.05 0.04
Net realized and unrealized gains on investments... 0.40 0.40
------ ------
Total from Investment Activities................. 0.45 0.44
------ ------
Distributions:
Net investment income.............................. (0.05) (0.04)
------ ------
NET ASSET VALUE, END OF PERIOD....................... $10.44 $10.44
============ ============
Total Return (excludes sales and redemption charges)
(b)................................................ 4.36% 4.38%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000).................. $2,041 $4,400
Ratio of expenses to average net assets (c)........ 0.02% 0.74%
Ratio of net investment income to average net
assets (c)....................................... 4.04% 3.37%
Ratio of expenses to average net assets (c)*....... 3.04% 3.78%
Ratio of net investment income to average net
assets (c)*...................................... 1.02% 0.33%
Portfolio turnover**............................... 33.02% 33.02%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Net asset value includes the effect of income earned on initial seed money
for the period from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to public).
See Notes to Financial Statements.
37
<PAGE> 40
For more information, complete the following form and mail it to:
Time Horizon Funds
c/o BA Investment Services
P.O. Box 29026
Glendale, CA 91209-9026
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First Name Last Name
...............................................................................
Street Address
...............................................................................
City State Zip Code
...............................................................................
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
/ / A broker assisted me with the purchase of my Time Horizon Fund.
...............................................................................
Name of Broker
...............................................................................
Name of Brokerage Firm
/ / I purchased my Time Horizon Fund without the assistance of a broker.
I want to find out more about Bank of America-managed mutual funds. Please
send me a free investing kit on the mutual funds selected below. The kit
includes a prospectus, which has more complete information on the Fund(s),
including charges and expenses. Read the prospectus carefully before
investing or sending money.
/ / THE TIME HORIZON FUNDS
/ / For goals about 10 years away (around the year 2005)
/ / For goals about 20 years away (around the year 2015)
/ / For goals about 30 years away (around the year 2025)
/ / PACIFIC HORIZON FUNDS with the following investment goals:
/ / Aggressive Growth
/ / Conservative Growth
/ / Growth Combined With Income
/ / Current Income
/ / Tax-Free Income
Additional Comments:
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<PAGE> 41
COPTMHR95S
