<PAGE> 1
TIME HORIZON FUNDS
PORTFOLIO 1
PORTFOLIO 2
PORTFOLIO 3
Annual Report
June 30, 1997
[TIME HORIZON FUNDS LOGO]
NOT FDIC INSURED
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TIME HORIZON FUNDS
3435 Stelzer Road, Columbus, OH 43219
1-800-247-9728
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MANAGER INDEPENDENT AUDITORS
Bank of America National Trust and Ernst & Young, LLP
Savings Association 515 S. Flower Street
555 California Street Los Angeles, CA 90071
San Francisco, CA 94104
DISTRIBUTOR FUND COUNSEL
Concord Financial Group, Inc. Vedder, Price, Kaufman
3435 Stelzer Road & Kammholz
Columbus, OH 43219 222 N. LaSalle Street
Chicago, IL 60601
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SUB-ADMINISTRATOR
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, OH 43219
FUND SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY, NOR ARE THEY OBLIGATIONS
OF OR OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
The Time Horizon Funds are sponsored and distributed by Concord Financial Group,
Inc., which is unaffiliated with Bank of America. Bank of America serves as
manager and receives fees for such services. From time to time, Bank of America
may provide other services to the Funds for additional fees, as disclosed in the
Funds' prospectus.
This material must be preceded or accompanied by a current prospectus.
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INVESTMENTS IN THE TIME HORIZON FUNDS ARE NOT BANK
NOT DEPOSITS AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY,
FDIC BANK OF AMERICA OR ANY OF ITS AFFILIATES. MUTUAL FUNDS
INSURED ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
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Contents
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. UNDERSTANDING YOUR
. SHAREHOLDER REPORT 2-4
.
. TIME HORIZON FUND FACTS 5
.
. LETTER FROM THE MANAGER 6-7
.
. INTERVIEW WITH THE TIME HORIZON
. FUNDS INVESTMENT MANAGEMENT
. TEAM 8-20
.
. STATEMENTS OF ASSETS
. AND LIABILITIES 21
.
. STATEMENTS OF OPERATIONS 22
.
. STATEMENTS OF CHANGES
. IN NET ASSETS 24-25
.
. SCHEDULES OF PORTFOLIO
. INVESTMENTS 26-55
.
. NOTES TO FINANCIAL STATEMENTS 56-64
.
. FINANCIAL HIGHLIGHTS 65-73
.
. REPORT OF INDEPENDENT AUDITORS 74
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UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the
information from the report.
The TABLE OF CONTENTS helps you locate
the information you want.
[SAMPLE]
The LETTER FROM THE MANAGER
provides a brief overview of the
economy and how it affects the
financial markets.
The INTERVIEW WITH THE TIME
HORIZON FUNDS INVESTMENT
MANAGEMENT TEAM provides you with
specific information about the
Funds during the period and
general investment strategies
going forward.
[SAMPLE] Because a picture or chart can help clarify
the text, The TIME HORIZON FUND FACTS illustrate the
most important features of the Funds. The
illustrations represent the current asset allocation
and target asset allocation ranges for each portfolio,
as well as a brief description of the Manager's
investment strategy.
In annual reports, mutual funds that are not "money
market" funds are required by the Securities and
Exchange Commission (SEC) to provide shareholders
with a comparison of a hypothetical $10,000 investment in the Fund to a
benchmark index of the broader market. The performance of the benchmark index
depicts the aggregate performance of investments similar to those in the Fund
for the same time period. While the benchmark index provides a general
representation of the market, there are two reasons why it should be used only
as a guide. First, the Fund, in its prospectus, must clearly define which
investments can be made by the Fund. The index does not necessarily have the
same limitations. Second, the index does not reflect any expenses that
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT
A GUARANTEE OF FUTURE RESULTS.)
<TABLE>
<CAPTION>
A Shares B Shares S&P 500 Lehman Brothers
<S> <C> <C> <C> <C>
9/5/95 9,553 9,500 10,000 10,000
12/31/95 9,866 9,819 11,046 10,528
3/31/96 10,019 9,959 11,640 10,341
6/30/96 10,191 10,109 12,158 10,400
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2
<PAGE> 5
accompany a real investment, such as sales charges, management fees, portfolio
transaction costs or the cash reserves required to provide daily liquidity. The
performance of the Fund must show these costs as well as any front-end or
deferred sales charges.
The financial statements summarize and describe the Funds' financial
transactions. They are broken down into four different statements, which are
illustrated below:
The SCHEDULES OF PORTFOLIO INVESTMENTS list each investment holding in the
Funds as of the date of the financial statements. Investments may be grouped by
category (by industry or security type, for example). The percentage of each
Fund's net assets represented by these groupings is also disclosed.
TYPE OF SECURITY
INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
[SAMPLE] 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
[SAMPLE] BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET ASSETS
DIVIDED BY THE NUMBER OF SHARES OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
3
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The STATEMENTS OF OPERATIONS show the amount of dividend and interest income
earned from each Fund's investments, the expenses incurred by the Funds from
their operations and any gains or losses, both realized and unrealized, by the
Funds from holding and/or selling any investments.
INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
[SAMPLE] GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN UNREALIZED
GAINS OR LOSSES ON FUND HOLDINGS DURING THE
PERIOD
NET CHANGE IN NET ASSETS DUE TO FUND OPERATIONS
The STATEMENTS OF CHANGES IN NET ASSETS show the changes in the net assets of
the Funds during each of the two most recent reporting periods. The changes in
net assets are generally broken down into four distinct sections:
OPERATIONS: SEE STATEMENTS OF OPERATIONS
DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
[SAMPLE]
NET REALIZED GAINS: TOTAL REALIZED GAINS
DISTRIBUTED TO SHAREHOLDERS DURING THE PERIODS
FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED DURING
THE PERIODS
The NOTES TO FINANCIAL STATEMENTS are footnotes to the Statements listed above.
These footnotes include information on accounting methods used by the Funds,
contractual arrangements between the Funds and their service providers, certain
transactions effected by the Funds and other general information about the
Funds.
The FINANCIAL HIGHLIGHTS show, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Funds. It also shows key
data and ratios such as the total investment return for each period, the
portfolio turnover rate for the Funds, the ratio of expenses to average net
assets, the ratio of net investment income to average net assets, and the
average commission rate paid on portfolio transactions.
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TIME HORIZON FUND FACTS
The Time Horizon Funds offer three asset allocation funds that target
specific investment time horizons, shown below. Each Fund seeks to provide
long-term investors maximum total return over its stated time period, while also
increasingly emphasizing capital preservation as the Fund approaches its target
time horizon.
To accomplish this, the investment management team invests in a combination
of stocks, bonds and a small amount of cash. The mix among these asset
categories will change according to current market conditions, as well as to how
close each Fund is to its target time horizon. By selecting the Time Horizon
Fund that most closely matches the expected timing of major investment goals,
such as sending a child to college, retirement or purchasing a home, you'll be
investing in a portfolio of investments that is managed with a time horizon
similar to that of your own goals. Of course, no mutual fund can guarantee that
an investor's goals will be met.
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<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
TIME HORIZON 2005 2015 2025
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ASSET ALLOCATION(1)
(AS OF 06/30/97) Bonds/Cash 64% Bonds/Cash 50% Bonds/Cash 30%
Stocks 36% Stocks 50% Stocks 70%
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CURRENT ALLOCATION RANGES(2)
STOCKS 15%-45% 30%-70% 40%-100%
BONDS 55%-85% 30%-70% 0%-60%
CURRENT TARGET
ASSET ALLOCATION Bonds/Cash 65% Bonds/Cash 50% Bonds/Cash 30%
Stocks 35% Stocks 50% Stocks 70%
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(1) The portfolio's composition is subject to change. Percentages shown are
percentages of portfolio value.
(2) Under normal market conditions, each portfolio is currently managed within
the strategic asset allocation ranges shown, based on the Portfolio
Manager's evaluation of the anticipated returns and risks for the various
asset classes in the near term. The portfolio will change its focus over
time, increasingly emphasizing capital preservation as it nears its target
time horizon. After a portfolio reaches its time horizon target date, it is
anticipated that it will continue to be managed with a predominant emphasis
on capital preservation.
5
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LETTER FROM THE MANAGER
Dear Shareholder:
The Time Horizon Funds completed their first full fiscal
year with solid total returns in an environment
favorable to stocks and fairly benign to fixed-income
securities. The broad U.S. stock market gained 20.60%
and 34.58% for the six and twelve months ended June 30,
1997, respectively. Intermediate-term U.S. bonds
delivered total returns of 3.09% and 8.15% for six
months and one year, respectively. Overseas, where
economic conditions are improving but still lag those in
the U.S., equity securities advanced 11.36% and 13.16%
during the six and twelve month periods, respectively.*
David R. Johnsen
Senior Vice President
Bank of America NT&SA
[PHOTO] Investment Advisors
Division
Mr. Johnsen plays a
key role in the
portfolio management
of the Time Horizon
Funds
FAVORABLE CONDITIONS FOR FINANCIAL ASSETS
As we stated in our Semi-Annual (12/31/96) shareholder report, the U.S.
securities market continues to be the beneficiary of slow economic growth and a
low rate of inflation. These are conditions that are favorable to business and
the performance of financial assets, especially equities. Corporate earnings
grew at higher-than-expected rates during the past one-year period, giving
investors reason to believe that further earnings gains are possible.
This belief helped to boost the prices of U.S. stocks. Another contributing
factor was the steady flow of money from Americans investing for retirement,
which continues to increase demand for equities, and a proposed reduction in the
capital gains tax rate, which would make investing in equity securities more
attractive.
For the second consecutive year, the stocks of large companies benefited most
from this positive scenario. Throughout most of the year, indices for
large-capitalization stocks outperformed those that track middle and
small-capitalization stocks. The S&P 500 delivered a 12-month total return
of 34.58%, compared to a return of 23.33% for the S&P 400, an index of
middle-capitalization stocks, and 21.69% gain for the S&P 600, a small-cap
index.*
The slow-but-steady economic scenario also resulted in a fairly stable market
for fixed-income securities, albeit one that offered little opportunity for
capturing sizable appreciation or major yield advantages. Early in the period,
the bond market was preoccupied with the levels and trends of growth and the
possibility that demands for higher wages would put inflationary pressure on the
seven-year running economic expansion. As it became increasingly evident that
inflation was remaining under control, the fixed-income market settled into a
pattern of relatively narrow moves in rates and prices. In addition, this market
experienced relatively small price variances between securities of different
quality.
- ---------------
* As measured by the Standard & Poor's 500 Index of Large-Cap Common Stocks, the
S&P 400 Index of Mid-Cap Common Stocks and the S&P 600 Index of Small-Cap
Common Stocks from 7/1/96 through 6/30/97, the Lehman Brothers Aggregate Bond
Index, and the Morgan Stanley Capital International (MSCI) Europe, Australasia
and Far East (EAFE) Index.
6
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FULL STRATEGIC ALLOCATIONS ACHIEVED
Against this backdrop, the Time Horizon Funds continued to attract new assets,
reaching the target investment allocations outlined in the Funds' prospectus by
the end of the first calendar quarter of 1997. Each Fund is now diversified
within and across a combination of four asset classes -- U.S. stocks, foreign
stocks, bonds and cash.
We expect to make modest adjustments in each Fund's asset allocation from time
to time, to reflect changes in market conditions, but without deviating from the
Fund's stated long-term objective (i.e., to deliver a competitive return without
undue risk by a given date). As each Fund's time horizon grows nearer, we expect
to modify the Funds' asset combinations to achieve an increasingly conservative
risk/reward ratio. Over time, the proportion of equities in your Fund may be
reduced, the average maturity of the fixed-income investments will grow smaller,
or we may take other steps to keep the Fund's overall risk level in line with
the objectives of each Portfolio.
We continue to seek out individual securities that offer good value and the
potential for superior long-term returns. We focus on purchasing undervalued
equity shares of companies that can potentially deliver above-average earnings
growth. On the fixed-income side, we seek securities that may provide an income
or yield advantage without a commensurate increase in risk.
POISED TO PURSUE REAL-LIFE GOALS
As you know, the Time Horizon Funds are comprised of Portfolios 1, 2 and 3, each
of which currently has three classes of shares: A Shares, B Shares and K Shares.
In addition to the strategic allocation changes that occurred during the period
ended June 30, 1997, on June 16, 1997, the 4.5% front-end sales charge on A
Shares of each Portfolio was eliminated, qualifying this class of shares as
no-load. B Shares of each Portfolio are subject to a contingent deferred sales
charge (maximum 5%). K Shares, which are offered primarily to 401(k) plan and
other retirement plan participants and certain other eligible individuals, are
offered without a sales charge.
Now that we have achieved each Fund's strategic allocation, our commitment to
you is to maintain a strategy that makes sense for your timeframe. In other
words, we will focus on generating solid, long-term returns at a level of risk
appropriate to meet real-life goals.
Finally, we wish to thank you for your continued investment in and support of
the Time Horizon Funds.
Sincerely,
/s/ David R. Johnsen
David R. Johnsen
7
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TIME HORIZON PORTFOLIO 1
TIME HORIZON PORTFOLIO 2
TIME HORIZON PORTFOLIO 3
AN INTERVIEW WITH THE TIME HORIZON FUNDS INVESTMENT MANAGEMENT TEAM
DAVID R. JOHNSEN, SENIOR VICE PRESIDENT, AND
MICHAEL J. BUDD, VICE PRESIDENT
Q
WHAT WERE THE MOST SIGNIFICANT FACTORS IN THE PORTFOLIOS' PERFORMANCE DURING
THE PAST 12 MONTHS?
A
As I mentioned in my letter, the sustained expansion of the U.S. economy at
a slow rate, combined with low inflation, has been beneficial to equities. The
expansion has helped companies control costs and improve profits and shareholder
values. In turn, investors have been very encouraged by the outstanding earnings
growth and have been willing to pay higher prices for stocks in hopes of
receiving even larger income and capital appreciation in the future.
Add the increased demand for stocks from baby-boomers who want to prepare for a
retirement without Social Security, and you have the formula for a very strong
market in stocks. For much of the past two years, this phenomenon affected
primarily the largest companies, but during the second quarter of this year, we
saw it extend to the mid-sized and small capitalization companies.
Q
HOW DID THE STRENGTH OF THE U.S. STOCK MARKET AFFECT YOUR STRATEGIC
ALLOCATION OF THE PORTFOLIOS?
A
The continued expansion of the U.S. equity market had little impact on the
allocations of the portfolios. Each portfolio has a target level of equity
participation, ranging from a low of 35% for Portfolio 1 to a high of 70% for
the Portfolio 3, which has a longer time horizon. By mid-fiscal year, we had
already invested sufficient assets in equities to meet each Portfolio's target
level. And, since the market conditions were favorable, we had no reason to
adjust the target levels of the allocations.
If we had modified our targets in response to the market, we might have
outperformed the broad stock market indices. But that's not our approach. We
won't pursue extraordinary short-term gains from particular stocks or sectors of
the market at the expense of the broader, longer-term strategy.
Q
NET ASSETS IN THE FUNDS ROSE BY $59.4 MILLION DURING THE YEAR. HOW DID YOU
INVEST THIS ADDITIONAL MONEY?
A
Although we changed the percentages of foreign equity and fixed income, the
flow of dollars went across all asset categories to bring them in line with the
balanced strategic target allocation for each Portfolio delineated in the
prospectus.
Q
YOU MENTIONED EARLIER THAT YOU SEEK "GOOD VALUE AND THE POTENTIAL FOR
SUPERIOR LONG-TERM GROWTH." HOW DO YOU PURSUE THIS IN THE U.S. STOCK MARKETS?
A
Our approach is to focus on choosing individual securities that embody those
characteristics. We maintain a neutral allocation among the various sectors of
the stock market (e.g., retail stocks, technology, pharmaceuticals), meaning
that the percentage of stocks from any sector should be roughly equivalent to
that of the Stan-
8
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dard & Poor's 500 and 400 Indices. We seek added value by identifying the most
promising companies within each of a wide range of industries, rather than the
best-performing industries.
Q
YOU SOLD SHARES OF INTEL, WHICH HAD BEEN YOUR LARGEST HOLDING AND ONE OF THE
BEST-PERFORMING STOCKS IN THE U.S. WHY?
A
The gains in the stock market have resulted largely from the price increases
of a relatively narrow range of companies. Among them was Intel Corporation,
which rose over 130% in 1996 and, in our view, became overvalued. The stock's
price was out of line, based on earnings estimates and the outlook for earnings
growth, which declined in the second quarter.
We prefer to own stocks that are relatively inexpensive compared to others in
the industry. We search from companies that have positive earnings momentum and
a demonstrated ability to deliver higher earnings over time. While Intel is
clearly a market leader, the stock no longer fits our parameters.
Q
WHAT DID YOU DO WITH THE PROFITS FROM THE SALE OF INTEL SHARES?*
A
The proceeds from the Intel trade were reinvested in shares of Motorola,
Inc., which was in the same sector (and therefore helped us keep our neutral
weighting) but was more reasonably priced for its potential.
This exchange of Intel for Motorola highlights another of our tactics: We do not
try to time the market. We believe in being fully invested and in keeping
shareholders' assets working in long-term securities that can meet their goals.
Cash levels in the Portfolios have been consistently below 10%, the maximum
amount permitted under normal market conditions by the prospectus, and have
declined to 0% at times during the past year.
Q
HOW DO YOU MANAGE THE FIXED-INCOME PORTION OF THE PORTFOLIO TO SEEK
"SUPERIOR LONG-TERM RETURNS?"
A
In general, we invest in fixed-income securities to generate income rather
than capital appreciation. Entering this fiscal year, the Portfolios'
fixed-income assets were predominantly allocated to U.S. Treasury securities,
which provided a conservative base upon which to build. During the year, we
added non-Treasuries, to move toward the weightings of the appropriate Lehman
Brothers index for each Portfolio. By the end of the first quarter, the
Portfolios were diversified with corporate, agency and mortgage-backed
securities.
Q
HOW DO THE FIXED-INCOME PORTIONS OF THE THREE PORTFOLIOS DIFFER?
A
In keeping with the respective objectives of the Portfolios, the holdings
are somewhat different, so that the highest overall quality and shortest
average maturity and duration are reflected in Portfolio 1, which also has the
shortest time horizon. At the end of the fiscal year, the average credit quality
(relative level of risk of default), average maturity and duration of each
Portfolio were as follows:**
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<CAPTION>
PORTFOLIO PORTFOLIO PORTFOLIO
1 2 3
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<S> <C> <C> <C>
Credit quality AAA AAA AA1
Avg. Maturity 4.30 years 5.30 years 5.40 years
Duration 3.06 years 3.75 years 3.80 years
- --------------------------------------------------
</TABLE>
Higher duration portfolios typically suffer greater losses when interest rates
rise and post larger gains when rates fall. We could try to manipulate the
Portfolios' results by
9
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attempting to predict the direction of interest rates and adjusting their
durations accordingly. Instead, we try to maintain a neutral weighting compared
to the appropriate index and concentrate more on finding fixed-income securities
that may provide a higher yield for a better price and little or no additional
risk.
For instance, strong corporate earnings in recent years helped corporate bonds
outperform Treasury securities during the fiscal year and contributed to an
overall improvement in the credit quality of corporate bonds. At the same time,
relatively stable interest rates reduced the likelihood of mortgage refinancing
or prepayment risk in mortgagebacked securities. We were able to use new dollars
invested in the Portfolios to increase our holding of both categories, thereby
adding some yield (higher current income) without significantly impacting the
overall quality of the fixed-income portion of each Portfolio.
Q
WHAT HAPPENED TO YOUR FOREIGN EQUITY ALLOCATION? HOW DO YOU MANAGE THIS
PORTION OF THE PORTFOLIO TO SEEK "SUPERIOR LONG-TERM RETURNS?"
A
By mid-year we raised the Portfolios' investments in foreign securities to
their stated strategic allocations. Since then, we have maintained the
allocations at or very near those target levels, despite the fact that foreign
equity markets underperformed the U.S. stock market in absolute and dollar
terms.
As measured in U.S. dollars, the Morgan Stanley Capital International (MSCI)
Europe, Australasia and Far East (EAFE) Index posted a gain of 11.36% in the
first half of 1997 and 13.16% in the past twelve months.***
While foreign markets continue to lag those here at home, we believe the
economies in much of Europe have potentially bottomed and are poised to recover.
A benign interest rate environment and a new commitment to building shareholder
value -- a well-accepted idea here in the U.S. but one that is still fairly new
in Europe -- are helping. At the same time, Japan is showing signs of economic
recovery after four or five arduous years, while several of the smaller
Southeast Asian nations are struggling to recoup from excesses in the past two
years. As a result, the two funds to which we currently entrust the foreign
equities portion of each Portfolio have reduced investments in the U.K. and in
Southeast Asia, and have boosted their holdings in Japan, in which they were
previously underweighted. The foreign equity portion of the portfolios is
managed through these two funds to seek individual securities that have
relatively good value and good growth prospects. We expect that management will
continue to look for superior long-term returns in foreign equities by changing
the country weightings.
Q
WHAT IS YOUR OUTLOOK FOR THE PORTFOLIOS DURING THE COMING SIX AND TWELVE
MONTHS?
A
We do not forecast the directions of the financial markets or the economy.
Our approach stresses hitting target allocations and then meeting or exceeding
benchmarks through individual security selection and maintaining full investment
of assets.
Having said that, we must add that we cannot afford to ignore the state of the
markets or the economy either. At this time, we view domestic stocks as fairly
valued in general vis-a-vis bonds and international stocks and have no rationale
for
10
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changing the Portfolios' allocations. As long as inflation here in the U.S.
remains under control -- we believe that the Federal Reserve's choice not to
change short-term rates early in July is evidence that it is under
control -- and economic growth is steady, we expect to maintain the present
strategic balances and to devote our energies to the selection of individual
securities and diversification of each sector of the Portfolios.
*The position in Intel Corporation was sold on June 13, 1997. At the time of
sale, the percentage of Portfolios 1, 2 and 3 was 0.60%, 0.70% and 1.10%,
respectively. As of June 30, 1997, Motorola, Inc.'s percentage of Portfolios
1,2, and 3 was 0.50%, 0.50% and 0.90%, respectively.
**Portfolio composition is subject to change.
***The Morgan Stanley Capital International (MSCI) Index and Europe, Australasia
and Far East (EAFE) Index are unmanaged indices and may not be invested in
directly.
11
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TIME HORIZON PORTFOLIO 1
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
LEHMAN BROS.
A SHARES B SHARES K SHARES S&P 500 AGGREGATE BOND
9/5/95 10,000 9,500 10,000 10,000 10,000
12/31/95 10,327 9,818.5 10,318.5 11,039.9 10,527
3/31/96 10,488 9,958.6 10,458.6 11,640 10,339.2
6/30/96 10,688 10,108.7 10,608.7 12,165.5 10,398.3
9/30/96 10,868 10,398.8 10,798.8 12,537.7 10,589.7
12/31/96 11,293 10,790.3 11,190.3 13,587.3 10,907.5
3/30/97 11,282 10,759.5 11,159.5 13,942.7 10,847
6/30/97 12,068 11,520 11,930.2 16,372.3 11,246.5
HOW PERFORMANCE COMPARES
The chart compares Time Horizon Portfolio 1 to the S&P 500, which is an
unmanaged index typically used as a performance benchmark for equity
investments, and to the Lehman Brothers Aggregate Bond Index, an unmanaged index
often used as a benchmark for fixed-income investments. Hypothetical investments
in the S&P 500 and Lehman Brothers Aggregate Bond Index do not reflect any sales
charges, management fees, transaction costs or other expenses that would be
incurred if an investor were to actually purchase individual securities or
mutual funds, while the performance of the Fund reflects all expenses, fees and
the applicable contingent deferred sales charge on B Shares.
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------
SINCE INCEPTION
1-YEAR (9/5/95)
A Shares+ 13.13% 10.87%
B Shares (load) 8.36% 8.08%
B Shares (no-load) 12.36% 10.12%
K Shares++ 12.46% 10.17%
SEE LETTER FROM THE MANAGER FOR FACTORS AFFECTING FUND PERFORMANCE.
Investment return and principal value are historical and will vary with market
conditions, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
+ Return figures for Class A Shares include change in share price and
reinvestment of dividends, but do not include a front-end sales charge. On June
16, 1997, the 4.5% front-end sales charge on A Shares of each Portfolio was
eliminated, qualifying this class of shares as no-load. The service contractors
are currently waiving fees and are assuming certain Fund expenses. This
voluntary waiver may be modified or terminated at any time which would reduce
the Fund's performance.
Total return figures for Class B Shares, unless otherwise indicated, include
change in share price and reinvestment of dividends, as well as the applicable
5.0% contingent deferred sales charge. The service contractors are currently
waiving fees and are assuming certain Fund expenses. This voluntary waiver may
be modified or terminated at any time which would reduce the Fund's performance.
++ The inception date of K Shares (the date K Shares were initially funded) was
July 22, 1996. K Shares for Portfolio 1 did not commence operations until
February 7, 1997. For this reason, performance results for K Shares prior to the
commencement date reflect the performance of
12
<PAGE> 15
no-load B Shares. Shareholders with K Shares are not charged a front-end or
back-end (CDSC) sales charge, but are subject to a maximum Distribution Fee or
Administrative Services fee in the amount of 0.75% and a Shareholder Service Fee
in the amount of 0.25%, both of which are based on the average daily net assets
of K Shares. The service contractors are currently waiving fees and are assuming
certain Fund expenses. This voluntary waiver may be modified or terminated at
any time which would reduce the Fund's performance.
S&P 500 is a registered trademark of Standard & Poor's Corporation.
Neither the S&P 500, nor the Lehman Brothers Aggregate Bond Index may be
invested in directly.
13
<PAGE> 16
A CLOSER LOOK AT YOUR PORTFOLIO
TIME HORIZON PORTFOLIO 1
EQUITY PORTION
SECTOR DIVERSIFICATION
(as a percentage of equity portion only)
Finance 16.2%
Technology 15.0%
Consumer Cyclicals 14.6%
Utilities 12.4%
Health Care 9.5%
Capital Goods 9.4%
Energy 7.6%
Consumer Staples 7.0%
Basics 6.5%
Transportation 1.8%
----------------------------------------
TOP FIVE EQUITY HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
----------------------------------------
1. Coca-Cola Company 0.70%
2. General Electric Company 0.60%
3. Merck & Company, Inc. 0.60%
4. Microsoft Corporation 0.60%
5. Exxon Corporation 0.50%
FIXED INCOME PORTION
QUALITY BREAKDOWN
(fixed-income portion of portfolio only)
Treasury 49.0%
A 27.2%
Agency 17.1%
AA 6.7%
----------------------------------------
TOP FIVE FIXED-INCOME HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
----------------------------------------
1. US Treasury Notes
5.375 5/31/98 7.20%
2. US Treasury Notes
6.75 5/31/99 5.50%
3. US Treasury Notes
6.375 5/15/99 3.90%
4. US Treasury Notes
6.25 2/15/03 3.80%
5. US Treasury Notes
6.25 8/31/00 3.40%
*The portfolio's composition is subject to change. Percentages shown are
percentages of portfolio value.
14
<PAGE> 17
TIME HORIZON PORTFOLIO 2
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
LEHMAN BROS.
A SHARES B SHARES K SHARES S&P 500 AGGREGATE BOND
9/5/95 10,000 9,500 10,000 10,000 10,000
12/31/95 10,397 9,877.5 10,377.5 11,039.9 10,527
3/31/96 10,558 10,027.6 10,527.6 11,640 10,339.2
6/30/96 10,748 10,187.7 10,687.7 12,165.5 10,398.3
9/30/96 10,988 10,507.8 10,907.8 12,537.7 10,589.7
12/31/96 11,498 10,997.5 11,400.1 13,587.3 10,907.5
3/31/97 11,446 10,905.7 11,318.2 13,942.7 10,847
6/30/97 12,473 11,895.5 12,322 16,372.3 11,246.5
HOW PERFORMANCE COMPARES
The chart compares Time Horizon Portfolio 2 to the S&P 500, which is an
unmanaged index typically used as a performance benchmark for equity
investments, and to the Lehman Brothers Aggregate Bond Index, an unmanaged index
often used as a benchmark for fixed-income investments. Hypothetical investments
in the S&P 500 and Lehman Brothers Aggregate Bond Index do not reflect any sales
charges, management fees, transaction costs or other expenses that would be
incurred if an investor were to actually purchase individual securities or
mutual funds, while the performance of the Fund reflects all expenses, fees and
the applicable contingent deferred sales charge on B Shares.
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------
SINCE INCEPTION
1-YEAR (9/5/95)
A Shares+ 16.05% 12.89%
B Shares (load) 11.04% 10.00%
B Shares (no-load) 15.04% 12.01%
K Shares++ 15.29% 12.14%
SEE LETTER FROM THE MANAGER FOR FACTORS AFFECTING FUND PERFORMANCE.
Investment return and principal value are historical and will vary with market
conditions, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
+ Return figures for Class A Shares include change in share price and
reinvestment of dividends, but do not include a front-end sales charge. On June
16, 1997, the 4.5% front-end sales charge on A Shares of each Portfolio was
eliminated, qualifying this class of shares as no-load. The service contractors
are currently waiving fees and are assuming certain Fund expenses. This
voluntary waiver may be modified or terminated at any time which would reduce
the Fund's performance.
Total return figures for Class B Shares, unless otherwise indicated, include
change in share price and reinvestment of dividends, as well as the applicable
5.0% contingent deferred sales charge. The service contractors are currently
waiving fees and are assuming certain Fund expenses. This voluntary waiver may
be modified or terminated at any time which would reduce the Fund's performance.
++ The inception date of K Shares (the date K Shares were initially funded) was
July 22, 1996. K Shares for Portfolio 2 did not commence operations until
October 18, 1996. For this reason, performance results for K Shares prior to the
commencement date reflect the performance of no-
15
<PAGE> 18
load B Shares. Shareholders with K Shares are not charged a front-end or
back-end (CDSC) sales charge, but are subject to a maximum Distribution Fee or
Administrative Services fee in the amount of 0.75% and a Shareholder Service Fee
in the amount of 0.25%, both of which are based on the average daily net assets
of K Shares. The service contractors are currently waiving fees and are assuming
certain Fund expenses. This voluntary waiver may be modified or terminated at
any time which would reduce the Fund's performance.
S&P 500 is a registered trademark of Standard & Poor's Corporation.
Neither the S&P 500, nor the Lehman Brothers Aggregate Bond Index may be
invested in directly.
16
<PAGE> 19
A CLOSER LOOK AT YOUR PORTFOLIO
TIME HORIZON PORTFOLIO 2
EQUITY PORTION
SECTOR DIVERSIFICATION
(as a percentage of equity portion only)
Finance 16.0%
Technology 15.1%
Cyclicals 14.3%
Utilities 12.1%
Health Care 9.7%
Capital Goods 9.3%
Energy 7.8%
Staples 7.6%
Basics 6.4%
Transportation 1.7%
----------------------------------------
TOP FIVE EQUITY HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
----------------------------------------
1. General Electric Company 0.80%
2. Microsoft Corporation 0.80%
3. Coca-Cola Company 0.70%
4. Merck & Company, Inc. 0.70%
5. Exxon Corporation 0.60%
FIXED INCOME PORTION
QUALITY BREAKDOWN
(fixed-income portion of portfolio only)
Treasury 41.3%
A 29.7%
Agency 21.7%
AA 7.3%
----------------------------------------
TOP FIVE FIXED-INCOME HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
----------------------------------------
1. US Treasury Notes
6.25 2/15/03 5.50%
2. US Treasury Notes
6.50 5/15/05 4.40%
3. US Treasury Notes
6.75 5/31/99 3.50%
4. US Treasury Notes
6.25 8/31/00 3.30%
5. FHLMC 7.00 5/01/04 2.80%
*The portfolio's composition is subject to change. Percentages shown are
percentages of portfolio value.
17
<PAGE> 20
TIME HORIZON PORTFOLIO 3
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
LEHMAN BROS.
A SHARES B SHARES K SHARES S&P 500 AGGREGATE BOND
9/5/95 10,000 9,500 10,000 10,000 10,000
12/31/95 10,436 9,938.1 10,438.1 11,039.9 10,527
3/31/96 10,696 10,168.1 10,668.1 11,640 10,339.2
6/30/96 10,946 10,398 10,898 12,165.5 10,398.3
9/30/96 11,206 10,738 11,318 12,537.7 10,589.7
12/31/96 11,847 11,342.4 11,742.4 13,587.3 10,907.5
3/30/97 11,806 11,281.5 11,691.7 13,942.7 10,847
6/30/97 13,203 12,640.3 13,070.7 16,372.3 11,246.5
HOW PERFORMANCE COMPARES
The chart compares Time Horizon Portfolio 3 to the S&P 500, which is an
unmanaged index typically used as a performance benchmark for equity
investments, and to the Lehman Brothers Aggregate Bond Index, an unmanaged index
often used as a benchmark for fixed-income investments. Hypothetical investments
in the S&P 500 and Lehman Brothers Aggregate Bond Index do not reflect any sales
charges, management fees, transaction costs or other expenses that would be
incurred if an investor were to actually purchase individual securities or
mutual funds, while the performance of the Fund reflects all expenses, fees and
the applicable contingent deferred sales charge on B Shares.
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------
SINCE INCEPTION
1-YEAR (9/5/95)
A Shares+ 20.62% 16.48%
B Shares (load) 15.66% 13.72%
B Shares (no-load) 19.66% 15.69%
K Shares++ 19.94% 15.83%
SEE LETTER FROM THE MANAGER FOR FACTORS AFFECTING FUND PERFORMANCE.
Investment return and principal value are historical and will vary with market
conditions, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
+ Return figures for Class A Shares include change in share price and
reinvestment of dividends, but do not include a front-end sales charge. On June
16, 1997, the 4.5% front-end sales charge on A Shares of each Portfolio was
eliminated, qualifying this class of shares as no-load. The service contractors
are currently waiving fees and are assuming certain Fund expenses. This
voluntary waiver may be modified or terminated at any time which would reduce
the Fund's performance.
Total return figures for Class B Shares, unless otherwise indicated, include
change in share price and reinvestment of dividends, as well as the applicable
5.0% contingent deferred sales charge. The service contractors are currently
waiving fees and are assuming certain Fund expenses. This voluntary waiver may
be modified or terminated at any time which would reduce the Funds performance.
++ The inception date of K Shares (the date K Shares were initially funded) was
July 22, 1996. K Shares for Portfolio 3 did not commence operations until
January 28, 1997. For this reason, performance results for K Shares prior to the
commencement date reflect the performance of no-
18
<PAGE> 21
load B Shares. Shareholders with K Shares are not charged a front-end or
back-end (CDSC) sales charge, but are subject to a maximum Distribution Fee or
Administrative Services fee in the amount of 0.75% and a Shareholder Service Fee
in the amount of 0.25%, both of which are based on the average daily net assets
of K Shares. The service contractors are currently waiving fees and are assuming
certain Fund expenses. This voluntary waiver may be modified or terminated at
any time which would reduce the Fund's performance.
S&P 500 is a registered trademark of Standard & Poor's Corporation.
Neither the S&P 500, nor the Lehman Brothers Aggregate Bond Index may be
invested in directly.
19
<PAGE> 22
A CLOSER LOOK AT YOUR PORTFOLIO
TIME HORIZON PORTFOLIO 3
EQUITY PORTION
SECTOR DIVERSIFICATION
(as a percentage of equity portion only)
Finance 16.1%
Technology 15.0%
Cyclicals 14.7%
Utilities 12.5%
Health Care 9.5%
Capital Goods 9.4%
Energy 7.6%
Staples 6.9%
Basics 6.5%
Transportation 1.8%
----------------------------------------
TOP FIVE EQUITY HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
----------------------------------------
1. General Electric Company 1.30%
2. Microsoft Corporation 1.30%
3. Coca-Cola Company 1.20%
4. Merck & Company, Inc. 1.20%
5. Exxon Corporation 1.00%
FIXED INCOME PORTION
QUALITY BREAKDOWN
(fixed-income portion of portfolio only)
A 38.7%
Agency 28.5%
Treasury 23.2%
AA 9.5%
----------------------------------------
TOP FIVE FIXED-INCOME HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
----------------------------------------
1. US Treasury Notes
6.50 5/15/05 2.10%
2. FHLMC 7.00 5/01/04 1.90%
3. FHLMC 6.50 6/01/04 1.50%
4. US Treasury Notes
6.25 8/31/00 1.50%
5. FNMA 7.00 6/01/04 1.20%
*The portfolio's composition is subject to change. Percentages shown are
percentages of portfolio value.
20
<PAGE> 23
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$37,022,653, $40,532,746, and $42,375,640,
respectively).............................. $39,871,030 $44,693,531 $48,179,350
Cash......................................... 628 192 3,532
Interest and dividends receivable............ 294,886 308,174 194,832
Receivable for capital shares sold........... 14,350 72,751 95,552
Receivable for investment securities sold.... 143,931 224,052 312,991
Unamortized organization costs............... 16,175 15,732 14,605
Prepaid expenses............................. 19,894 24,018 26,712
----------- ----------- -----------
Total Assets............................... 40,360,894 45,338,450 48,827,574
----------- ----------- -----------
LIABILITIES:
Payable for investment securities
purchased.................................. 144,408 238,043 328,990
Payable for capital shares redeemed.......... 108,886 37,014 39,754
Management fees payable...................... 6,579 8,062 5,768
Shareholder service fees payable (A, B and K
Shares).................................... 8,224 9,162 9,802
12b-1 fees payable (B and K Shares).......... 19,520 20,840 23,056
Transfer agent fees payable.................. 5,691 2,434 5,392
Audit fees payable........................... 10,221 8,333 5,847
Legal fees payable........................... 7,928 9,848 16,075
Printing fees payable........................ 28,458 30,214 23,727
Other accrued expenses....................... 12,174 11,145 5,166
----------- ----------- -----------
Total Liabilities.......................... 352,089 375,095 463,577
----------- ----------- -----------
NET ASSETS................................... $40,008,805 $44,963,355 $48,363,997
=========== =========== ===========
Net Assets:
A Shares................................... $ 8,383,530 $10,898,940 $10,483,372
B Shares................................... 31,608,928 33,964,783 37,786,720
K Shares................................... 16,347 99,632 93,905
----------- ----------- -----------
Total...................................... $40,008,805 $44,963,355 $48,363,997
=========== =========== ===========
Shares Outstanding (no par value, unlimited
shares authorized):
A Shares................................... 718,317 897,160 809,303
B Shares................................... 2,725,785 2,817,680 2,938,300
K Shares................................... 1,409 8,280 7,288
----------- ----------- -----------
Total...................................... 3,445,511 3,723,120 3,754,891
=========== =========== ===========
Net asset value
A Shares -- offering price per share....... $ 11.67 $ 12.15 $ 12.95
=========== =========== ===========
B Shares -- offering price per share....... $ 11.60 $ 12.05 $ 12.86
=========== =========== ===========
K Shares -- offering price per share....... $ 11.61 $ 12.03 $ 12.89
=========== =========== ===========
COMPOSITION OF NET ASSETS:
Capital...................................... $36,208,804 $39,675,771 $41,218,607
Accumulated undistributed net investment
income..................................... 532,155 455,883 293,304
Accumulated net realized gains on investment
transactions............................... 419,469 670,916 1,048,376
Net unrealized appreciation of investments... 2,848,377 4,160,785 5,803,710
----------- ----------- -----------
NET ASSETS, JUNE 30, 1997.................... $40,008,805 $44,963,355 $48,363,997
=========== =========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
21
<PAGE> 24
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Operations
For the year ended June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................ $1,337,024 $1,148,780 $ 735,306
Dividends............................... 221,596 345,391 451,152
---------- ---------- ----------
Total Income.......................... 1,558,620 1,494,171 1,186,458
---------- ---------- ----------
EXPENSES:
Management fees......................... 202,553 216,727 211,743
Shareholder service fees (A Shares)..... 20,127 23,127 20,221
Shareholder service fees (B Shares)..... 64,257 67,041 67,888
Shareholder service fees (K Shares)..... 12 107 76
12b-1 fees (B Shares)................... 192,599 200,979 203,525
12b-1 fees (K Shares)................... 27 224 158
Accounting fees......................... 30,342 30,262 30,228
Custodian fees.......................... 27,017 28,197 24,935
Transfer agent fees..................... 56,005 61,572 70,883
Legal fees.............................. 29,694 33,902 39,020
Audit fees.............................. 9,490 7,845 5,134
Organization costs...................... 5,110 5,110 4,380
Trustees' fees.......................... 21,486 21,173 19,966
Registration and filing fees............ 52,531 51,339 47,675
Reports to shareholders................. 37,153 42,620 38,593
Other expenses.......................... 4,719 3,474 2,193
---------- ---------- ----------
Total Expenses........................ 753,122 793,699 786,618
Less: Fee waivers....................... (218,330) (227,686) (225,934)
---------- ---------- ----------
Total Net Expenses.................... 534,792 566,013 560,684
---------- ---------- ----------
NET INVESTMENT INCOME..................... 1,023,828 928,158 625,774
NET REALIZED/UNREALIZED GAINS ON
INVESTMENTS:
Net realized gains on investment
transactions........................ 435,557 526,465 890,937
Net change in unrealized appreciation
on investments...................... 2,656,028 4,001,664 5,494,585
---------- ---------- ----------
Net realized/unrealized gains on
investments............................. 3,091,585 4,528,129 6,385,522
---------- ---------- ----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.............................. $4,115,413 $5,456,287 $7,011,296
========== ========== ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 25
(Intentionally Left Blank)
23
<PAGE> 26
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1
-----------------------------
YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 30,
1997 1996(a)
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................ $ 1,023,828 $ 377,434(b)
Net realized gains on investment transactions........ 435,557 107,472
Net change in unrealized appreciation of
investments........................................ 2,656,028 192,349
----------- -----------
Change in net assets resulting from operations......... 4,115,413 677,255
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
A Shares........................................... (235,826) (15,257)
B Shares........................................... (585,618) (32,683)
K Shares(c)........................................ (27) --
Net realized gains from investment transactions
A Shares........................................... (32,408) --
B Shares........................................... (90,844) --
K Shares(c)........................................ (4) --
----------- -----------
Change in net assets from shareholder distributions.... (944,727) (47,940)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.......................... 17,998,235 27,464,750
Dividends reinvested................................. 891,487 38,330
Cost of shares redeemed.............................. (7,904,517) (2,279,481)
----------- -----------
Change in net assets from capital share transactions... 10,985,205 25,223,599
----------- -----------
Change in net assets................................... 14,155,891 25,852,914
NET ASSETS:
Beginning of year.................................... 25,852,914 --
----------- -----------
End of year.......................................... $40,008,805 $ 25,852,914
=========== ===========
</TABLE>
- ---------------
(a) Period from September 5, 1995 (inception date) to June 30, 1996.
(b) Includes income earned during the period from July 28, 1995 (initial seed
date) through September 4, 1995 (initial sale of shares to the public).
(c) Period from July 22, 1996 (inception date) to June 30, 1997.
See Notes to Financial Statements.
24
<PAGE> 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 2 PORTFOLIO 3
---------------------------- ----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996(a) 1997 1996(a)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
$ 928,158 $ 318,369(b) $ 625,774 $ 223,429(b)
526,465 147,373 890,937 159,812
4,001,664 159,121 5,494,585 309,125
----------- ----------- ----------- -----------
5,456,287 624,863 7,011,296 692,366
----------- ----------- ----------- -----------
(229,351) (15,619) (151,395) (9,321)
(522,814) (22,247) (377,979) (16,511)
(821) -- (17) --
(698) -- (700) --
(2,013) -- (2,349) --
(3) -- -- --
----------- ----------- ----------- -----------
(755,700) (37,866) (532,440) (25,832)
----------- ----------- ----------- -----------
19,815,954 27,032,533 23,714,685 23,645,035
744,721 32,856 527,344 21,147
(6,036,471) (1,913,822) (4,831,133) (1,858,471)
----------- ----------- ----------- -----------
14,524,204 25,151,567 19,410,896 21,807,711
----------- ----------- ----------- -----------
19,224,791 25,738,564 25,889,752 22,474,245
25,738,564 -- 22,474,245 --
----------- ----------- ----------- -----------
$44,963,355 $ 25,738,564 $48,363,997 $ 22,474,245
=========== =========== =========== ===========
</TABLE>
25
<PAGE> 28
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS -- 30.6%
ADVERTISING -- 0.2%
Omnicom Group........................................... 1,200 $ 73,950
-----------
AEROSPACE/DEFENSE -- 0.7%
Lockheed Martin Corp.................................... 800 82,850
Parker-Hannifin Corp.................................... 800 48,550
Thiokol Corp............................................ 500 35,000
United Technologies Corp................................ 1,400 116,200
-----------
282,600
-----------
AIR TRANSPORTATION -- 0.1%
Airborne Freight Corp................................... 500 20,938
UAL Corp. (b)........................................... 400 28,625
-----------
49,563
-----------
AUTOMOBILES & TRUCKS -- 0.4%
Ford Motor Co........................................... 2,600 98,150
General Motors Corp..................................... 1,000 55,688
-----------
153,838
-----------
BANKS -- 2.8%
AmSouth Bancorporation.................................. 1,200 45,375
Barnett Banks, Inc...................................... 2,000 105,000
Chase Manhattan Corp.................................... 1,000 97,063
Citicorp................................................ 600 72,338
Comerica, Inc........................................... 1,600 108,799
First of America Bank Corp.............................. 1,200 54,900
First Union Corp. (N.C.)................................ 1,400 129,499
Fleet Financial Group, Inc.............................. 800 50,600
Marshall & Ilsley Corp.................................. 900 36,563
Mellon Bank Corp........................................ 2,200 99,275
Mercantile Bankshares, Corp............................. 900 36,000
NationsBank Corp........................................ 1,000 64,500
Northern Trust Corp..................................... 1,100 53,213
Regions Financial Corp.................................. 1,600 50,600
State Street Corp....................................... 2,800 129,499
-----------
1,133,224
-----------
BEVERAGES -- 0.9%
Coca-Cola Co............................................ 3,800 265,050
Coca-Cola Enterprises................................... 900 20,700
PepsiCo, Inc............................................ 1,900 71,369
-----------
357,119
-----------
BREWERIES -- 0.1%
Adolph Coors Co., Class B............................... 700 18,638
Anheuser-Busch Cos., Inc................................ 700 29,356
-----------
47,994
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
26
<PAGE> 29
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
BUILDING MATERIALS -- 0.1%
Southdown, Inc. ........................................ 1,100 $ 47,988
-----------
BUSINESS SERVICES -- 0.3%
AccuStaff, Inc. (b)..................................... 1,200 28,425
ACNielson Corp. (b)..................................... 900 17,663
CUC International, Inc. (b)............................. 2,200 56,787
-----------
102,875
-----------
CHEMICALS - PETRO & INORGANIC -- 0.1%
Dow Chemical Co. ....................................... 400 34,850
-----------
CHEMICALS - SPECIALTY -- 0.6%
Air Products & Chemicals, Inc. ......................... 800 65,000
Cytec Industries, Inc. (b).............................. 1,000 37,375
Ecolab, Inc. ........................................... 900 42,975
Lubrizol Corp. ......................................... 1,500 62,906
Nalco Chemical Co. ..................................... 800 30,900
-----------
239,156
-----------
COMPUTER SOFTWARE -- 1.1%
BMC Software, Inc. (b).................................. 1,100 60,913
Cadence Design Systems, Inc. (b)........................ 1,000 33,500
Compuware Corp. (b)..................................... 1,000 47,750
McAfee Associates, Inc. (b)............................. 400 25,250
Microsoft Corp. (b)..................................... 2,000 252,749
-----------
420,162
-----------
COMPUTERS - MAIN & MINI -- 1.1%
Compaq Computer Corp. (b)............................... 1,000 99,249
Dell Computer Corp. (b)................................. 900 105,693
HBO & Company........................................... 1,100 75,763
International Business Machines......................... 600 54,113
Stratus Computer, Inc. (b).............................. 800 40,000
Sun Microsystems, Inc. (b).............................. 1,700 63,272
-----------
438,090
-----------
COMPUTERS - PERIPHERAL EQUIPMENT -- 0.3%
3Com Corp. (b).......................................... 1,375 61,875
Adaptec, Inc. (b)....................................... 900 31,275
Quantum Corp. (b)....................................... 2,000 40,750
-----------
133,900
-----------
CONTAINERS -- 0.1%
Owens-Illinois, Inc. (b)................................ 1,100 34,100
-----------
COSMETICS & TOILETRIES -- 0.2%
Avon Products, Inc. .................................... 1,000 70,563
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
27
<PAGE> 30
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
DIVERSIFIED PRODUCTS -- 0.8%
E.I. du Pont de Nemours................................. 2,800 $ 176,050
Tyco International Ltd. ................................ 1,900 132,169
-----------
308,219
-----------
ELECTRICAL EQUIPMENT -- 1.0%
General Electric........................................ 3,800 248,424
Honeywell, Inc. ........................................ 1,100 83,463
Teradyne, Inc. (b)...................................... 1,300 51,025
-----------
382,912
-----------
ELECTRONIC COMPONENTS -- 0.9%
Altera Corp. (b)........................................ 800 40,400
Applied Materials, Inc. (b)............................. 600 42,488
Maxim Integrated Products (b)........................... 800 45,500
Motorola, Inc. ......................................... 2,500 190,000
SCI Systems Inc. (b).................................... 200 12,750
Solectron Corp. (b)..................................... 400 28,000
Xilinx, Inc. (b)........................................ 400 19,625
-----------
378,763
-----------
ENGINEERING & CONSTRUCTION -- 0.1%
Crane Co. .............................................. 900 37,631
-----------
ENTERTAINMENT -- 0.4%
King World Productions, Inc. ........................... 1,000 35,000
MGM Grand, Inc. (b)..................................... 600 22,200
The Walt Disney Co. .................................... 1,219 97,825
-----------
155,025
-----------
FINANCIAL SERVICES -- 0.8%
Bear Stearns Companies, Inc. ........................... 1,935 66,153
Franklin Resources, Inc. ............................... 700 50,794
Morgan Stanley Dean Witter Discover & Co. .............. 2,800 120,575
Travelers Group, Inc. .................................. 1,300 81,981
-----------
319,503
-----------
FOOD & RELATED -- 0.8%
ConAgra, Inc. .......................................... 1,400 89,775
Dean Foods Co. ......................................... 1,100 44,413
DEKALB Genetics Corp., Class B.......................... 300 23,925
Hershey Foods Corp. .................................... 900 49,781
Interstate Bakeries Corp. .............................. 900 53,381
Sara Lee Corp. ......................................... 1,700 70,763
-----------
332,038
-----------
FOREST & PAPER PRODUCTS -- 0.3%
James River Corporation of Virginia..................... 2,200 81,400
Mead Corp. ............................................. 700 43,575
-----------
124,975
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
28
<PAGE> 31
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
FURNITURE & FURNISHINGS -- 0.2%
Armstrong World Industries, Inc. ....................... 400 $ 29,350
Leggett & Platt, Inc. .................................. 1,500 64,500
-----------
93,850
-----------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.2%
HFS, Inc. (b)........................................... 800 46,400
Promus Hotel Corp. (b).................................. 700 27,125
-----------
73,525
-----------
HOUSEHOLD - GENERAL PRODUCTS -- 0.6%
Clorox Co. ............................................. 600 79,200
Dial Corp. ............................................. 2,000 31,250
Proctor & Gamble Co. ................................... 1,000 141,250
-----------
251,700
-----------
INDUSTRIAL GOODS & SERVICES -- 0.2%
Xerox Corporation....................................... 800 63,100
-----------
INSURANCE -- 1.1%
Allstate Insurance...................................... 1,200 87,599
CIGNA Corp. ............................................ 400 71,000
Conseco, Inc. .......................................... 1,800 66,600
Equitable Companies, Inc. .............................. 1,800 59,850
EXEL Ltd. .............................................. 1,000 52,750
SunAmerica, Inc. ....................................... 1,300 63,375
Torchmark Corp. ........................................ 700 49,875
-----------
451,049
-----------
LEISURE TIME INDUSTRIES -- 0.0%
Callaway Golf Co. ...................................... 500 17,750
-----------
MACHINERY & EQUIPMENT -- 0.5%
AGCO Corp. ............................................. 1,200 43,125
Caterpillar, Inc. ...................................... 600 64,425
Harsco Corp. ........................................... 900 36,450
Ingersoll-Rand Co. ..................................... 700 43,225
Trinity Industries...................................... 800 25,400
-----------
212,625
-----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.2%
Allegiance Corp. ....................................... 700 19,075
Beckman Instruments, Inc. .............................. 800 38,600
U.S. Surgical Corp. .................................... 900 33,525
-----------
91,200
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
29
<PAGE> 32
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
MEDICAL HOSPITAL MANAGEMENT SERVICES -- 0.6%
Health Care & Retirement Corp. (b)...................... 750 $ 25,031
Healthcare Compare Corp. (b)............................ 800 41,900
Oxford Health Plans, Inc. (b)........................... 900 64,576
Phycor, Inc. (b)........................................ 1,600 55,100
Tenet Healthcare Corp. ................................. 1,300 38,431
-----------
225,038
-----------
METAL FABRICATION -- 0.2%
Precision Castparts Corp. .............................. 800 47,700
Timken Co. ............................................. 1,000 35,563
-----------
83,263
-----------
METALS - DIVERSIFIED -- 0.1%
Phelps Dodge Corp. ..................................... 700 59,631
-----------
MOTOR VEHICLE PARTS -- 0.2%
Dana Corp. ............................................. 1,300 49,400
Magna International, Inc., Class A...................... 300 18,056
-----------
67,456
-----------
OIL & GAS -- 2.6%
Camco International, Inc. .............................. 500 27,375
Columbia Gas System, Inc. .............................. 700 45,675
Ensco International, Inc. (b)........................... 700 36,925
Exxon Corp. ............................................ 3,000 184,499
Kerr-McGee Corp. ....................................... 200 12,675
Mobil Corp. ............................................ 1,400 97,825
Murphy Oil Corporation.................................. 200 9,750
Parker & Parsley Petro Co. ............................. 1,400 49,525
Pennzoil Co. ........................................... 300 23,025
Philips Petroleum Co. .................................. 1,800 78,750
Royal Dutch Petroleum................................... 1,600 86,400
Smith International, Inc. (b)........................... 700 42,525
Texaco, Inc. ........................................... 900 97,875
Tidewater, Inc. ........................................ 2,600 114,400
USX-Marathon Group...................................... 2,600 75,075
Valero Energy Corp. .................................... 1,100 39,875
-----------
1,022,174
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
30
<PAGE> 33
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
PHARMACEUTICALS -- 2.5%
Abbott Laboratories..................................... 1,000 $ 66,750
Bergen Brunswig Corp., Class A.......................... 1,250 34,844
Bristol-Myers Squibb Co. ............................... 2,200 178,199
Cardinal Health, Inc. .................................. 600 34,350
Johnson & Johnson....................................... 2,500 160,938
Merck & Co., Inc. ...................................... 2,200 227,699
Perrigo Company (b)..................................... 2,400 30,000
Pfizer, Inc. ........................................... 800 95,600
Schering-Plough......................................... 2,600 124,475
Watson Pharmaceutical, Inc. (b)......................... 900 38,025
-----------
990,880
-----------
PUBLISHING -- 0.3%
American Greetings, Class A............................. 300 11,138
Houghton Mifflin Co. ................................... 200 13,350
New York Times Co., Class A............................. 1,600 80,800
Washington Post, Class B................................ 70 27,860
-----------
133,148
-----------
RAILROAD -- 0.2%
Norfolk Southern Corp. ................................. 900 90,675
-----------
RECREATIONAL VEHICLES -- 0.1%
Polaris Industries, Inc. ............................... 900 29,306
-----------
RESTAURANTS -- 0.1%
Applebee's International Inc. .......................... 1,200 32,100
-----------
RETAIL - APPAREL -- 0.5%
Liz Claiborne, Inc. .................................... 500 23,313
Ross Stores, Inc. ...................................... 1,500 49,031
TJX Companies, Inc. .................................... 4,400 116,050
-----------
188,394
-----------
RETAIL - FOOD STORES -- 0.2%
American Stores Co. .................................... 1,300 64,188
-----------
RETAIL - GEN MERCHANDISE -- 0.2%
Dayton Hudson Corp. .................................... 1,300 69,144
Family Dollar Stores, Inc. ............................. 1,100 29,975
-----------
99,119
-----------
RETAIL - OFFICE SUPPLY -- 0.2%
OfficeMax, Inc. (b)..................................... 2,500 36,094
U.S. Office Products Co. (b)............................ 800 24,450
-----------
60,544
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
31
<PAGE> 34
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
RETAIL - SPECIALTY STORES -- 0.4%
Bed Bath & Beyond, Inc. (b)............................. 1,500 $ 45,563
Home Depot, Inc. ....................................... 1,900 130,981
-----------
176,544
-----------
SECURITY SERVICES -- 0.1%
Pittston Brink's Group.................................. 900 27,000
-----------
STEEL -- 0.2%
AK Steel Holding Corp. ................................. 700 30,888
USX-U.S. Steel Group, Inc. ............................. 1,500 52,593
-----------
83,481
-----------
TELECOMMUNICATIONS -- 0.4%
Harris Corp. ........................................... 1,100 92,400
Lucent Technologies, Inc. .............................. 1,200 86,475
-----------
178,875
-----------
TELECOMMUNICATIONS - EQUIPMENT -- 0.3%
ADC Telecommunications, Inc. (b)........................ 1,100 36,713
Tellabs, Inc. (b)....................................... 1,400 78,225
-----------
114,938
-----------
TEXTILE -- 0.2%
Jones Apparel Group, Inc. (b)........................... 900 42,975
Tommy Hilfiger Corp. (b)................................ 900 36,169
-----------
79,144
-----------
TOBACCO -- 0.5%
Philip Morris Co., Inc. ................................ 3,900 173,063
Universal Corp. ........................................ 400 12,700
-----------
185,763
-----------
TOYS -- 0.1%
Hasbro, Inc. ........................................... 2,000 56,750
-----------
TRUCKING & SHIPPING -- 0.1%
CNF Transportation, Inc. ............................... 900 29,025
-----------
UTILITIES - ELECTRIC -- 1.4%
Boston Edison Co. ...................................... 1,900 50,113
CMS Energy Corp. ....................................... 2,100 74,025
Consolidated Edison Company of New York, Inc. .......... 1,600 47,100
DQE, Inc. .............................................. 1,900 53,675
FPL Group, Inc. ........................................ 1,700 78,305
GPU, Inc. .............................................. 3,500 125,562
Illinova Corp. ......................................... 2,100 46,200
Northern States Power................................... 800 41,400
Public Service Company of New Mexico.................... 2,300 41,113
-----------
557,493
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
32
<PAGE> 35
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
UTILITIES - GAS & PIPELINE -- 0.2%
Consolidated Natural Gas Co. ........................... 400 $ 21,525
MCN Corp. .............................................. 1,200 36,750
NICOR, Inc. ............................................ 1,000 35,875
-----------
94,150
-----------
UTILITIES - TELEPHONE -- 1.5%
Ameritech Corp. ........................................ 1,700 115,493
BellSouth Corp. ........................................ 2,700 125,212
LCI International, Inc. (b)............................. 2,400 52,500
SBC Communications, Inc. ............................... 1,800 111,375
Southern New England Telecommunications................. 900 34,988
U.S. West Communications Group.......................... 1,600 60,300
Worldcom, Inc. (b)...................................... 3,600 115,200
-----------
615,068
-----------
TOTAL COMMON STOCKS (COST $9,658,525)..................... 12,257,984
-----------
INVESTMENT COMPANIES -- 5.1%
T. Rowe Price Foreign Equity Fund....................... 70,100 1,262,501
T. Rowe Price International Equity Fund................. 50,500 779,720
-----------
TOTAL INVESTMENT COMPANIES (COST $1,767,444).............. 2,042,221
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
CORPORATE BONDS -- 21.5%
BANKS -- 0.4%
Norwest Corp., 6.55, 12/1/06............................ $ 175,000 169,094
-----------
COMPUTERS - MAIN & MINI -- 3.2%
International Business Machines, 5.65, 1/22/98.......... 775,000 775,248
International Business Machines, 6.375, 6/15/00......... 500,000 498,750
-----------
1,273,998
-----------
ELECTRICAL EQUIPMENT -- 1.2%
Honeywell, Inc., 6.75, 3/15/02.......................... 500,000 498,750
-----------
FINANCIAL SERVICES -- 7.0%
Chrysler Financial Corp., 6.95, 3/25/02................. 500,000 501,250
General Motors Acceptance Corp., 6.75, 2/7/02........... 250,000 249,375
Household Finance Corp., 6.875, 3/1/07.................. 250,000 245,313
Household Netherlands BV, 6.125, 3/1/03................. 200,000 190,750
International Lease Finance Corp., 6.875, 5/1/01........ 500,000 501,874
Merrill Lynch & Co., 6.00, 1/15/01...................... 350,000 342,563
Morgan Stanley Group, 8.10, 6/24/02..................... 750,000 789,374
-----------
2,820,499
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
33
<PAGE> 36
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
FOOD & RELATED -- 1.5%
Heinz Co., 6.875, 1/15/03............................... $ 200,000 $ 200,750
Kellogg Co., 5.90, 7/15/97.............................. 400,000 400,019
-----------
600,769
-----------
INDUSTRIAL GOODS & SERVICES -- 1.3%
Xerox Corp., Putable 6/15/99, @ 100, 5.875, 6/15/37..... 500,000 500,625
-----------
PHARMACEUTICALS -- 1.2%
Smithkline Beecham Corp., 6.625, 10/1/01................ 500,000 497,500
-----------
RETAIL - GENERAL MERCHANDISE -- 3.3%
J.C. Penny & Co., Putable 4/1/05, @ 100, 7.40, 4/1/37... 500,000 511,250
Sears Roebuck Acceptance, Putable 11/15/00, @ 100, 6.15,
11/15/05.............................................. 500,000 492,500
Wal-Mart Stores 7.25, 6/1/13............................ 305,000 306,525
-----------
1,310,275
-----------
TELECOMMUNICATIONS -- 0.8%
AT&T Corp., Callable 12/1/01, @ 105.56, 8.625,
12/1/31............................................... 300,000 318,000
-----------
TOBACCO -- 0.9%
Philip Morris Co., Inc., 7.50, 1/15/02.................. 350,000 355,688
-----------
UTILITIES - ELECTRIC -- 0.7%
Southern California Edison, 6.50, 6/1/01................ 265,000 262,681
-----------
TOTAL CORPORATE BONDS (COST $8,617,318)................... 8,607,879
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 11.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 1.3%
Federal Home Loan Mortgage Corporation, 8.00, 1/1/04.... 181,077 185,616
Federal Home Loan Mortgage Corporation, 7.00, 5/1/04.... 348,619 350,035
-----------
535,651
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 9.7%
Federal National Mortgage Association, 7.50, 6/1/03..... 434,134 440,959
Federal National Mortgage Association, 7.00, 6/1/04..... 80,000 80,300
Federal National Mortgage Association, 7.00, 6/1/04..... 299,747 300,868
Federal National Mortgage Association, 6.48, 6/28/04.... 750,000 742,838
Federal National Mortgage Association, 6.50, 1/1/06..... 399,294 390,977
Federal National Mortgage Association, 7.50, 5/1/07..... 403,801 409,212
Federal National Mortgage Association, 7.50, 10/1/11.... 740,096 750,701
Federal National Mortgage Association, 5.50, 12/25/14... 750,000 746,497
-----------
3,862,352
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$4,383,249)............................................. 4,398,003
-----------
U.S. TREASURY OBLIGATIONS -- 31.5%
TREASURY BILLS -- 0.1%
U.S. Treasury Bill, 8/14/97............................. 57,000 56,641
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
34
<PAGE> 37
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
TREASURY NOTES -- 31.4%
U.S. Treasury Note, 5.375, 5/31/98...................... $2,875,000 $ 2,865,399
U.S. Treasury Note, 6.375, 5/15/99...................... 1,550,000 1,557,533
U.S. Treasury Note, 6.75, 5/31/99....................... 2,175,000 2,199,947
U.S. Treasury Note, 5.875, 11/15/99..................... 1,100,000 1,092,608
U.S. Treasury Note, 6.25, 8/31/00....................... 1,367,000 1,366,070
U.S. Treasury Note, 6.125, 9/30/00...................... 300,000 298,614
U.S. Treasury Note, 6.375, 3/31/01...................... 500,000 500,510
U.S. Treasury Note, 6.625, 6/30/01...................... 200,000 201,838
U.S. Treasury Note, 6.25, 2/15/03....................... 1,540,000 1,528,096
U.S. Treasury Note, 6.50, 5/15/05....................... 900,000 897,687
-----------
12,508,302
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $12,596,117)........ 12,564,943
-----------
TOTAL INVESTMENTS (COST $37,022,653)(a) -- 99.7%.......... 39,871,030
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%............. 137,775
-----------
TOTAL NET ASSETS -- 100.0%................................ $40,008,805
===========
Percentages indicated are based on net assets of $40,008,805.
(a) Represents cost for financial reporting purposes and
differs from cost basis for federal income tax
purposes by the amount of losses recognized for
financial reporting purposes in excess of federal
income tax reporting of approximately $2,193. Cost for
federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
Unrealized appreciation................................. $3,020,342
Unrealized depreciation................................. (171,965)
----------
Net unrealized appreciation............................. $2,848,377
==========
(b) Represents non-income producing securities.
</TABLE>
- ---------------
See Notes to Financial Statements.
35
<PAGE> 38
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------- ------- -----------
<S> <C> <C>
COMMON STOCKS -- 40.2%
ADVERTISING -- 0.3%
Omnicom Group................................................ 2,200 $ 135,575
-----------
AEROSPACE/DEFENSE -- 0.9%
Lockheed Martin Corp......................................... 1,100 113,919
Parker-Hannifin Corp......................................... 900 54,619
Thiokol Corp................................................. 900 63,000
United Technologies Corp..................................... 2,000 166,000
-----------
397,538
-----------
AIR TRANSPORTATION -- 0.2%
Airborne Freight Corp........................................ 900 37,688
UAL Corp. (b)................................................ 500 35,781
-----------
73,469
-----------
AUTOMOBILES & TRUCKS -- 0.5%
Ford Motor Co................................................ 3,300 124,575
General Motors Corp.......................................... 1,400 77,963
-----------
202,538
-----------
BANKS -- 3.6%
AmSouth Bancorporation....................................... 2,250 85,078
Barnett Banks, Inc........................................... 2,600 136,500
Chase Manhattan Corp......................................... 1,400 135,888
Citicorp..................................................... 800 96,450
Comerica, Inc................................................ 2,100 142,800
First of America Bank Corp................................... 2,100 96,075
First Union Corp. (N.C.)..................................... 2,000 184,999
Fleet Financial Group, Inc................................... 900 56,925
Marshall & Ilsley Corp....................................... 1,600 65,000
Mellon Bank Corp............................................. 2,800 126,350
Mercantile Bankshares Corp................................... 1,500 60,000
NationsBank Corp............................................. 1,300 83,850
Northern Trust Corp.......................................... 2,100 101,588
Regions Financial Corp....................................... 3,000 94,875
State Street Corp............................................ 4,200 194,249
-----------
1,660,627
-----------
BEVERAGES -- 1.0%
Coca-Cola Co................................................. 4,700 327,825
Coca-Cola Enterprises........................................ 1,500 34,500
PepsiCo, Inc................................................. 2,400 90,150
-----------
452,475
-----------
BREWERIES -- 0.2%
Adolph Coors Co., Class B.................................... 1,300 34,613
Anheuser-Busch Cos., Inc..................................... 1,000 41,937
-----------
76,550
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
36
<PAGE> 39
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------- ------- -----------
<S> <C> <C>
BUILDING MATERIALS -- 0.2%
Southdown, Inc............................................... 2,000 $ 87,250
-----------
BUSINESS SERVICES -- 0.4%
AccuStaff, Inc. (b).......................................... 2,200 52,113
ACNielson Corp. (b).......................................... 1,500 29,438
CUC International, Inc. (b).................................. 3,000 77,437
-----------
158,988
-----------
CHEMICALS - PETRO & INORGANIC -- 0.1%
Dow Chemical Co.............................................. 400 34,850
-----------
CHEMICALS - SPECIALTY -- 0.9%
Air Products & Chemicals, Inc................................ 1,000 81,250
Cytec Industries, Inc. (b)................................... 1,900 71,013
Ecolab, Inc.................................................. 1,600 76,400
Lubrizol Corp................................................ 2,600 109,037
Nalco Chemical Co............................................ 1,500 57,938
-----------
395,638
-----------
COMPUTER SOFTWARE -- 1.5%
BMC Software, Inc. (b)....................................... 1,900 105,212
Cadence Design Systems, Inc. (b)............................. 1,800 60,300
Compuware Corp. (b).......................................... 1,800 85,950
McAfee Associates, Inc. (b).................................. 800 50,500
Microsoft Corp. (b).......................................... 2,800 353,849
Oracle Corp. (b)............................................. 500 25,188
-----------
680,999
-----------
COMPUTERS - MAIN & MINI -- 1.4%
Compaq Computer Corp. (b).................................... 1,400 138,950
Dell Computer Corp. (b)...................................... 1,200 140,924
HBO & Company................................................ 1,700 117,088
International Business Machines.............................. 800 72,150
Stratus Computer, Inc. (b)................................... 1,500 75,000
Sun Microsystems, Inc. (b)................................... 2,200 81,881
-----------
625,993
-----------
COMPUTERS - PERIPHERAL EQUIPMENT -- 0.5%
3Com Corp. (b)............................................... 1,775 79,875
Adaptec, Inc. (b)............................................ 1,600 55,600
Quantum Corp. (b)............................................ 3,800 77,425
-----------
212,900
-----------
CONTAINERS -- 0.1%
Owens-Illinois, Inc. (b)..................................... 2,100 65,100
-----------
COSMETICS & TOILETRIES -- 0.2%
Avon Products, Inc........................................... 1,200 84,675
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
37
<PAGE> 40
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------- ------- -----------
<S> <C> <C>
DIVERSIFIED PRODUCTS -- 0.9%
E.I. du Pont de Nemours...................................... 3,600 $ 226,350
Tyco International Ltd....................................... 2,300 159,994
-----------
386,344
-----------
ELECTRICAL EQUIPMENT -- 1.2%
General Electric............................................. 5,400 353,025
Honeywell, Inc............................................... 1,300 98,638
Teradyne, Inc. (b)........................................... 2,400 94,200
-----------
545,863
-----------
ELECTRONIC COMPONENTS -- 1.3%
Altera Corp. (b)............................................. 1,500 75,750
Applied Materials, Inc. (b).................................. 900 63,731
Maxim Integrated Products (b)................................ 1,400 79,625
Motorola, Inc................................................ 3,000 228,000
SCI Systems Inc. (b)......................................... 400 25,500
Solectron Corp. (b).......................................... 800 56,000
Xilinx, Inc. (b)............................................. 800 39,250
-----------
567,856
-----------
ENGINEERING & CONSTRUCTION -- 0.1%
Crane Co..................................................... 1,500 62,719
-----------
ENTERTAINMENT -- 0.5%
King World Productions, Inc.................................. 1,500 52,500
MGM Grand, Inc. (b).......................................... 1,200 44,400
The Walt Disney Co........................................... 1,519 121,900
-----------
218,800
-----------
FINANCIAL SERVICES -- 1.1%
Bear Stearns Companies, Inc.................................. 3,440 117,605
Franklin Resources, Inc...................................... 1,300 94,331
Morgan Stanley Dean Witter Discover & Co..................... 3,700 159,332
Travelers Group, Inc......................................... 1,700 107,206
-----------
478,474
-----------
FOOD & RELATED -- 1.1%
ConAgra, Inc................................................. 1,800 115,424
Dean Foods Co................................................ 2,000 80,750
DEKALB Genetics Corp., Class B............................... 400 31,900
Hershey Foods Corp........................................... 1,400 77,438
Interstate Bakeries Corp..................................... 1,600 94,900
Sara Lee Corp................................................ 2,300 95,738
-----------
496,150
-----------
FOREST & PAPER PRODUCTS -- 0.4%
James River Corporation of Virginia.......................... 3,300 122,100
Mead Corp.................................................... 1,000 62,250
-----------
184,350
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
38
<PAGE> 41
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------- ------- -----------
<S> <C> <C>
FURNITURE & FURNISHINGS -- 0.3%
Armstrong World Industries, Inc.............................. 500 $ 36,688
Leggett & Platt, Inc......................................... 2,700 116,100
-----------
152,788
-----------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.2%
HFS, Inc. (b)................................................ 1,100 63,800
Promus Hotel Corp. (b)....................................... 1,200 46,500
-----------
110,300
-----------
HOUSEHOLD-GENERAL PRODUCTS -- 0.8%
Clorox Co.................................................... 800 105,600
Dial Corp.................................................... 3,700 57,813
Proctor & Gamble Co.......................................... 1,400 197,750
-----------
361,163
-----------
INDUSTRIAL GOODS AND SERVICES -- 0.2%
Xerox Corporation............................................ 1,100 86,763
-----------
INSURANCE -- 1.5%
Allstate Insurance........................................... 1,600 116,800
CIGNA Corp................................................... 500 88,750
Conseco, Inc................................................. 2,600 96,200
Equitable Companies, Inc..................................... 2,400 79,800
EXEL Ltd..................................................... 1,800 94,950
SunAmerica, Inc.............................................. 2,400 116,999
Torchmark Corp............................................... 1,300 92,625
-----------
686,124
-----------
LEISURE TIME INDUSTRIES -- 0.1%
Callaway Golf Co............................................. 1,000 35,500
-----------
MACHINERY AND EQUIPMENT -- 0.7%
AGCO Corp.................................................... 2,100 75,469
Caterpillar, Inc............................................. 800 85,900
Harsco Corp.................................................. 1,700 68,850
Ingersoll-Rand Co............................................ 900 55,575
Trinity Industries........................................... 1,400 44,450
-----------
330,244
-----------
MEDICAL EQUIPMENT AND SUPPLIES -- 0.3%
Allegiance Corp.............................................. 1,200 32,700
Beckman Instruments, Inc..................................... 1,400 67,550
U.S. Surgical Corp........................................... 1,300 48,425
-----------
148,675
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
39
<PAGE> 42
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------- ------- -----------
<S> <C> <C>
MEDICAL HOSPITAL MANAGEMENT SERVICES -- 0.8%
Health Care & Retirement Corp. (b)........................... 1,300 $ 43,388
Healthcare Compare Corp. (b)................................. 1,400 73,325
Oxford Health Plans, Inc. (b)................................ 1,600 114,799
Phycor, Inc. (b)............................................. 2,200 75,763
Tenet Healthcare Corp........................................ 1,600 47,300
-----------
354,575
-----------
METAL FABRICATION -- 0.3%
Precision Castparts Corp..................................... 1,400 83,475
Timken Co.................................................... 1,800 64,013
-----------
147,488
-----------
METALS - DIVERSIFIED -- 0.2%
Phelps Dodge Corp............................................ 900 76,669
-----------
MOTOR VEHICLE PARTS -- 0.3%
Dana Corp.................................................... 1,700 64,600
Magna International, Inc., Class A........................... 800 48,150
-----------
112,750
-----------
OIL & GAS -- 3.4%
Camco International, Inc..................................... 1,100 60,225
Columbia Gas System, Inc..................................... 900 58,725
Ensco International, Inc. (b)................................ 1,300 68,575
Exxon Corp................................................... 4,200 258,299
Kerr-McGee Corp.............................................. 300 19,013
Mobil Corp................................................... 2,200 153,725
Murphy Oil Corporation....................................... 500 24,375
Parker & Parsley Petro Co.................................... 2,500 88,438
Pennzoil Co.................................................. 400 30,700
Philips Petroleum Co......................................... 2,300 100,625
Royal Dutch Petroleum........................................ 2,000 108,000
Smith International, Inc. (b)................................ 1,200 72,900
Texaco, Inc.................................................. 1,200 130,500
Tidewater, Inc............................................... 3,900 171,599
USX-Marathon Group........................................... 3,400 98,175
Valero Energy Corp........................................... 2,000 72,500
-----------
1,516,374
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
40
<PAGE> 43
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------- ------- -----------
<S> <C> <C>
PHARMACEUTICALS -- 3.1%
Abbott Laboratories.......................................... 1,400 $ 93,450
Bergen Brunswig Corp., Class A............................... 2,250 62,719
Bristol-Myers Squibb Co...................................... 3,000 242,999
Cardinal Health, Inc......................................... 1,150 65,838
Johnson & Johnson............................................ 3,400 218,875
Merck & Co., Inc............................................. 2,900 300,149
Perrigo Company (b).......................................... 4,400 55,000
Pfizer, Inc.................................................. 900 107,550
Schering-Plough.............................................. 3,600 172,350
Watson Pharmaceutical, Inc. (b).............................. 1,600 67,600
-----------
1,386,530
-----------
PUBLISHING -- 0.5%
American Greetings, Class A.................................. 400 14,850
Houghton Mifflin Co.......................................... 300 20,025
New York Times Co., Class A.................................. 2,200 111,100
Washington Post, Class B..................................... 190 75,620
-----------
221,595
-----------
RAILROAD -- 0.2%
Norfolk Southern Corp........................................ 1,100 110,825
-----------
RECREATIONAL VEHICLES -- 0.1%
Polaris Industries, Inc...................................... 1,500 48,844
-----------
RESTAURANTS -- 0.1%
Applebee's International Inc................................. 2,200 58,850
-----------
RETAIL - APPAREL -- 0.7%
Liz Claiborne, Inc........................................... 900 41,963
Ross Stores, Inc............................................. 2,800 91,525
TJX Companies, Inc........................................... 6,400 168,800
-----------
302,288
-----------
RETAIL - FOOD STORES -- 0.2%
American Stores Co........................................... 1,700 83,938
-----------
RETAIL - GEN MERCHANDISE -- 0.3%
Dayton Hudson Corp........................................... 1,600 85,100
Family Dollar Stores, Inc.................................... 2,200 59,950
-----------
145,050
-----------
RETAIL - OFFICE SUPPLY -- 0.2%
OfficeMax, Inc. (b).......................................... 4,500 64,968
U.S. Office Products Co. (b)................................. 1,400 42,788
-----------
107,756
-----------
RETAIL - SPECIALTY STORES -- 0.5%
Bed Bath & Beyond, Inc. (b).................................. 2,200 66,825
Home Depot, Inc.............................................. 2,300 158,556
-----------
225,381
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
41
<PAGE> 44
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- --------------------------------------------------------------- ------- -----------
<S> <C> <C>
SECURITY SERVICES -- 0.1%
Pittston Brink's Group....................................... 1,600 $ 48,000
-----------
STEEL -- 0.3%
AK Steel Holding Corp........................................ 1,100 48,538
USX-U.S. Steel Group, Inc.................................... 1,900 66,618
-----------
115,156
-----------
TELECOMMUNICATIONS -- 0.5%
Harris Corp.................................................. 1,600 134,400
Lucent Technologies, Inc..................................... 1,500 108,094
-----------
242,494
-----------
TELECOMMUNICATIONS - EQUIPMENT -- 0.4%
ADC Telecommunications, Inc. (b)............................. 2,000 66,750
Tellabs, Inc. (b)............................................ 1,800 100,575
-----------
167,325
-----------
TEXTILE -- 0.3%
Jones Apparel Group, Inc. (b)................................ 1,700 81,175
Tommy Hilfiger Corp. (b)..................................... 1,100 44,206
-----------
125,381
-----------
TOBACCO -- 0.5%
Philip Morris Co., Inc....................................... 4,900 217,438
Universal Corp............................................... 800 25,400
-----------
242,838
-----------
TOYS -- 0.2%
Hasbro, Inc.................................................. 2,500 70,938
-----------
TRUCKING & SHIPPING -- 0.1%
CNF Transportation, Inc...................................... 1,600 51,600
-----------
UTILITIES - ELECTRIC -- 2.0%
Boston Edison Co............................................. 2,900 76,488
CMS Energy Corp.............................................. 3,700 130,425
Consolidated Edison Company of New York, Inc................. 2,300 67,706
DQE, Inc..................................................... 3,400 96,050
FPL Group, Inc............................................... 2,300 105,944
GPU, Inc..................................................... 5,600 200,899
Illinova Corp................................................ 3,800 83,600
Northern States Power........................................ 1,400 72,450
Public Service Company of New Mexico......................... 4,200 75,075
-----------
908,637
-----------
UTILITIES - GAS & PIPELINE -- 0.3%
Consolidated Natural Gas Co.................................. 500 26,906
MCN Corp..................................................... 1,900 58,188
NICOR, Inc................................................... 1,800 64,575
-----------
149,669
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 45
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
--------- MARKET
SECURITY DESCRIPTION - VALUE
- --------------------------------------------------------------- -----------
<S> <C> <C>
UTILITIES - TELEPHONE -- 1.9%
Ameritech Corp............................................... 2,300 $ 156,256
BellSouth Corp............................................... 3,600 166,949
LCI International, Inc. (b).................................. 4,400 96,250
SBC Communications, Inc...................................... 2,400 148,500
Southern New England Telecommunications...................... 1,600 62,200
U.S. West Communications Group............................... 2,200 82,913
Worldcom, Inc. (b)........................................... 4,400 140,800
-----------
853,868
-----------
TOTAL COMMON STOCKS (COST $14,505,248)......................... 18,072,097
-----------
INVESTMENT COMPANIES -- 10.0%
T. Rowe Price Foreign Equity Fund............................ 125,900 2,267,459
T. Rowe Price International Equity Fund...................... 145,800 2,251,152
-----------
TOTAL INVESTMENT COMPANIES (COST $3,937,067)................... 4,518,611
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
CORPORATE BONDS -- 17.7%
BANKS -- 0.5%
Norwest Corp., 6.55, 12/1/06............................ $ 250,000 $ 241,563
-----------
COMPUTERS - MAIN & MINI -- 3.1%
International Business Machines, 5.65, 1/22/98.......... 900,000 900,288
International Business Machines, 6.375, 6/15/00......... 500,000 498,750
-----------
1,399,038
-----------
ELECTRICAL EQUIPMENT -- 1.1%
Honeywell, Inc., 6.75, 3/15/02.......................... 500,000 498,750
-----------
FINANCIAL SERVICES -- 5.2%
Chrysler Financial Corp., 6.95, 3/25/02 500,000 501,249
General Motors Acceptance Corp., 6.75, 2/7/02........... 250,000 249,375
Household Finance Corp., 6.875, 3/1/07.................. 250,000 245,313
Household Netherlands BV, 6.125, 3/1/03................. 200,000 190,750
International Lease Finance Corp., 6.875, 5/1/01........ 500,000 501,874
Merrill Lynch & Co., 6.00, 1/15/01...................... 350,000 342,563
Morgan Stanley Group, 8.10, 6/24/02..................... 250,000 263,125
-----------
2,294,249
-----------
FOOD & RELATED -- 1.1%
Heinz Co., 6.875, 1/15/03............................... 200,000 200,750
Kellogg Co., 5.90, 7/15/97.............................. 300,000 300,014
-----------
500,764
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 46
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
INDUSTRIAL GOODS AND SERVICES -- 1.1%
Xerox Corp., Putable 6/15/99, @ 100, 5.875, 6/15/37..... $ 500,000 $ 500,625
-----------
PHARMACEUTICALS -- 1.1%
Smithkline Beecham Corp., 6.625, 10/1/01................ 500,000 497,500
-----------
RETAIL - GENERAL MERCHANDISE -- 2.9%
J.C. Penney & Co., Putable 4/1/05, @ 100, 7.40,
4/1/37................................................ 500,000 511,250
Sears Roebuck Acceptance, Putable 11/15/00, @ 100, 6.15,
11/5/05............................................... 500,000 492,500
Wal-Mart Stores 7.25, 6/1/13............................ 300,000 301,500
-----------
1,305,250
-----------
TELECOMMUNICATIONS -- 0.5%
AT&T Corp., Callable 12/1/01, @ 105.56, 8.625,
12/1/31............................................... 200,000 212,000
-----------
TOBACCO -- 0.8%
Philip Morris Co., Inc., 7.50, 1/15/02.................. 350,000 355,688
-----------
UTILITIES - ELECTRIC -- 0.3%
Southern California Edison, 6.50, 6/1/01................ 145,000 143,731
-----------
TOTAL CORPORATE BONDS (COST $7,959,586)................... 7,949,158
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 11.7%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 3.7%
Federal Home Loan Mortgage Corporation, 8.00, 1/1/04.... 181,077 185,616
Federal Home Loan Mortgage Corporation, 7.00, 5/1/04.... 1,245,069 1,250,125
Federal Home Loan Mortgage Corporation, 6.50, 6/1/04.... 250,000 247,030
-----------
1,682,771
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 8.0%
Federal National Mortgage Association, 7.50, 6/1/03..... 434,134 440,959
Federal National Mortgage Association, 7.00, 6/1/04..... 370,000 371,388
Federal National Mortgage Association, 7.00, 6/1/04..... 599,494 601,735
Federal National Mortgage Association, 6.48, 6/28/04.... 750,000 742,837
Federal National Mortgage Association, 6.50, 1/1/06..... 399,294 390,977
Federal National Mortgage Association, 7.50, 5/1/07..... 403,801 409,212
Federal National Mortgage Association, 7.50, 10/1/11.... 370,049 375,351
Federal National Mortgage Association, 5.50, 12/25/14... 250,000 248,833
-----------
3,581,292
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$5,256,703)............................................. 5,264,063
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 47
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 19.8%
TREASURY BILLS -- 0.0%
U.S. Treasury Bill, 8/14/97............................. $ 6,000 $ 5,962
-----------
TREASURY NOTES -- 19.8%
U.S. Treasury Note, 6.375, 5/15/99...................... 200,000 200,972
U.S. Treasury Note, 6.75, 5/31/99....................... 1,550,000 1,567,779
U.S. Treasury Note, 6.25, 8/31/00....................... 1,492,000 1,490,985
U.S. Treasury Note, 6.125, 9/30/00...................... 200,000 199,076
U.S. Treasury Note, 6.375, 3/31/01...................... 1,000,000 1,001,020
U.S. Treasury Note, 6.25, 2/15/03....................... 2,473,000 2,453,884
U.S. Treasury Note, 6.50, 5/15/05....................... 1,975,000 1,969,924
-----------
8,883,640
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $8,874,142)......... 8,889,602
-----------
TOTAL INVESTMENTS (COST $40,532,746)(a) -- 99.4%.......... 44,693,531
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.6%............. 269,824
-----------
TOTAL NET ASSETS -- 100.0%................................ $44,963,355
===========
Percentages indicated are based on net assets of $44,963,355.
(a) Represents cost for financial reporting purposes and
differs from cost basis for federal income tax
purposes by the amount of losses recognized for
financial reporting purposes in excess of federal
income tax reporting of approximately $27,221. Cost
for federal income tax purposes differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation................................. $4,335,325
Unrealized depreciation................................. (174,540)
----------
Net unrealized appreciation............................. $4,160,785
==========
(b) Represents non-income producing securities.
</TABLE>
- ---------------
See Notes to Financial Statements.
45
<PAGE> 48
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS -- 60.3%
ADVERTISING -- 0.4%
Omnicom Group........................................... 2,800 $ 172,550
-----------
AEROSPACE/DEFENSE -- 1.4%
Lockheed Martin Corp. .................................. 1,900 196,769
Parker-Hannifin Corp. .................................. 1,600 97,100
Thiokol Corp. .......................................... 1,200 84,000
United Technologies Corp. .............................. 3,500 290,500
-----------
668,369
-----------
AIR TRANSPORTATION -- 0.3%
Airborne Freight Corp. ................................. 1,200 50,250
UAL Corp. (b)........................................... 1,000 71,563
-----------
121,813
-----------
AUTOMOBILES & TRUCKS -- 0.7%
Ford Motor Co. ......................................... 5,900 222,725
General Motors Corp. ................................... 2,400 133,650
-----------
356,375
-----------
BANKS -- 5.6%
AmSouth Bancorporation.................................. 2,850 107,766
Barnett Banks, Inc. .................................... 5,200 272,999
Chase Manhattan Corp. .................................. 2,500 242,656
Citicorp................................................ 1,400 168,788
Comerica, Inc. ......................................... 3,700 251,600
First of America Bank Corp. ............................ 2,700 123,525
First Union Corp. (N.C.)................................ 3,400 314,499
Fleet Financial Group, Inc. ............................ 1,800 113,850
Marshall & Ilsley Corp. ................................ 2,100 85,313
Mellon Bank Corp. ...................................... 5,000 225,625
Mercantile Bankshares, Corp. ........................... 1,900 76,000
NationsBank Corp. ...................................... 2,300 148,350
Northern Trust Corp. ................................... 2,700 130,613
Regions Financial Corp. ................................ 3,800 120,175
State Street Corp. ..................................... 6,200 286,749
-----------
2,668,508
-----------
BEVERAGES -- 1.7%
Coca-Cola Co. .......................................... 8,600 599,850
Coca-Cola Enterprises................................... 1,800 41,400
PepsiCo, Inc. .......................................... 4,300 161,519
-----------
802,769
-----------
BREWERIES -- 0.2%
Adolph Coors Co., Class B............................... 1,600 42,600
Anheuser-Busch Cos., Inc. .............................. 1,800 75,488
-----------
118,088
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
46
<PAGE> 49
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
BUILDING MATERIALS -- 0.2%
Southdown, Inc. ........................................ 2,600 $ 113,425
-----------
BUSINESS SERVICES -- 0.5%
AccuStaff, Inc. (b)..................................... 2,800 66,325
ACNielson Corp. (b)..................................... 1,900 37,288
CUC International, Inc. (b)............................. 5,200 134,225
-----------
237,838
-----------
CHEMICALS - PETRO & INORGANIC -- 0.1%
Dow Chemical Co. ....................................... 800 69,700
-----------
CHEMICALS - SPECIALTY -- 1.1%
Air Products & Chemicals, Inc. ......................... 1,900 154,374
Cytec Industries, Inc. (b).............................. 2,400 89,700
Ecolab, Inc. ........................................... 2,100 100,275
Lubrizol Corp. ......................................... 3,300 138,394
Nalco Chemical Co. ..................................... 1,900 73,388
-----------
556,131
-----------
COMPUTER SOFTWARE -- 2.2%
BMC Software, Inc. (b).................................. 2,500 138,438
Cadence Design Systems, Inc. (b)........................ 2,350 78,725
Compuware Corp. (b)..................................... 2,200 105,050
McAfee Associates, Inc. (b)............................. 1,000 63,125
Microsoft Corp. (b)..................................... 5,000 631,874
Oracle Corp. (b)........................................ 1,000 50,375
-----------
1,067,587
-----------
COMPUTERS - MAIN & MINI -- 2.2%
Compaq Computer Corp. (b)............................... 2,600 258,049
Dell Computer Corp. (b)................................. 2,100 246,619
HBO & Company........................................... 2,500 172,188
International Business Machines......................... 1,400 126,263
Stratus Computer, Inc. (b).............................. 1,900 95,000
Sun Microsystems, Inc. (b).............................. 4,000 148,875
-----------
1,046,994
-----------
COMPUTERS - PERIPHERAL EQUIPMENT -- 0.7%
3Com Corp. (b).......................................... 3,225 145,125
Adaptec, Inc. (b)....................................... 2,000 69,500
Quantum Corp. (b)....................................... 5,000 101,875
-----------
316,500
-----------
CONTAINERS -- 0.2%
Owens-Illinois, Inc. (b)................................ 2,500 77,500
-----------
COSMETICS & TOILETRIES -- 0.3%
Avon Products, Inc. .................................... 2,300 162,294
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
47
<PAGE> 50
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
DIVERSIFIED PRODUCTS -- 1.5%
E.I. du Pont de Nemours................................. 6,800 $ 427,550
Tyco International Ltd.................................. 4,600 319,988
-----------
747,538
-----------
ELECTRICAL EQUIPMENT -- 2.0%
General Electric........................................ 9,900 647,212
Honeywell, Inc. ........................................ 2,500 189,688
Teradyne, Inc. (b)...................................... 3,000 117,750
-----------
954,650
-----------
ELECTRONIC COMPONENTS -- 1.8%
Altera Corp. (b)........................................ 1,800 90,900
Applied Materials, Inc. (b)............................. 1,600 113,300
Maxim Integrated Products (b)........................... 1,800 102,375
Motorola, Inc. ......................................... 5,700 433,200
SCI Systems Inc. (b).................................... 500 31,875
Solectron Corp. (b)..................................... 1,000 70,000
Xilinx, Inc. (b)........................................ 1,000 49,063
-----------
890,713
-----------
ENGINEERING & CONSTRUCTION -- 0.2%
Crane Co. .............................................. 1,800 75,263
-----------
ENTERTAINMENT -- 0.8%
King World Productions, Inc. ........................... 2,100 73,500
MGM Grand, Inc. (b)..................................... 1,500 55,500
The Walt Disney Co. .................................... 2,919 234,250
-----------
363,250
-----------
FINANCIAL SERVICES -- 1.6%
Bear Stearns Companies, Inc. ........................... 4,385 149,912
Franklin Resources, Inc. ............................... 1,700 123,356
Morgan Stanley Dean Witter Discover & Co. .............. 6,700 288,519
Travelers Group, Inc. .................................. 3,200 201,800
-----------
763,587
-----------
FOOD & RELATED -- 1.6%
ConAgra, Inc. .......................................... 3,400 218,024
Dean Foods Co. ......................................... 2,500 100,938
DEKALB Genetics Corp., Class B.......................... 700 55,825
Hershey Foods Corp. .................................... 2,200 121,688
Interstate Bakeries Corp. .............................. 1,900 112,694
Sara Lee Corp. ......................................... 4,000 166,500
-----------
775,669
-----------
FOREST & PAPER PRODUCTS -- 0.6%
James River Corporation of Virginia..................... 5,200 192,400
Mead Corp. ............................................. 1,700 105,825
-----------
298,225
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
48
<PAGE> 51
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
FURNITURE & FURNISHINGS -- 0.4%
Armstrong World Industries, Inc......................... 900 $ 66,038
Leggett & Platt, Inc. .................................. 3,400 146,200
-----------
212,238
-----------
HOTEL MANAGEMENT & RELATED SERVICES -- 0.4%
HFS, Inc. (b)........................................... 1,900 110,200
Promus Hotel Corp. (b).................................. 1,600 62,000
-----------
172,200
-----------
HOUSEHOLD - GENERAL PRODUCTS -- 1.5%
Clorox Co. ............................................. 1,400 184,800
Dial Corp. ............................................. 4,800 75,000
Proctor & Gamble Co. ................................... 3,200 452,000
-----------
711,800
-----------
INDUSTRIAL GOODS & SERVICES -- 0.3%
Xerox Corporation....................................... 2,000 157,750
-----------
INSURANCE -- 2.2%
Allstate Insurance...................................... 3,000 218,999
CIGNA Corp. ............................................ 900 159,750
Conseco, Inc. .......................................... 4,800 177,600
Equitable Companies, Inc. .............................. 4,300 142,975
EXEL Ltd. .............................................. 2,100 110,775
SunAmerica, Inc. ....................................... 3,000 146,250
Torchmark Corp. ........................................ 1,600 114,000
-----------
1,070,349
-----------
LEISURE TIME INDUSTRIES -- 0.1%
Callaway Golf Co. ...................................... 1,200 42,600
-----------
MACHINERY & EQUIPMENT -- 1.0%
AGCO Corp. ............................................. 2,500 89,844
Caterpillar, Inc. ...................................... 1,400 150,325
Harsco Corp. ........................................... 2,000 81,000
Ingersoll-Rand Co. ..................................... 1,700 104,975
Trinity Industries...................................... 1,800 57,150
-----------
483,294
-----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.4%
Allegiance Corp. ....................................... 1,500 40,875
Beckman Instruments, Inc. .............................. 1,800 86,850
U.S. Surgical Corp. .................................... 2,300 85,675
-----------
213,400
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
49
<PAGE> 52
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
MEDICAL HOSPITAL MANAGEMENT SERVICES -- 1.1%
Health Care & Retirement Corp. (b)...................... 1,700 $ 56,738
Healthcare Compare Corp. (b)............................ 1,900 99,513
Oxford Health Plans, Inc. (b)........................... 1,900 136,324
Phycor, Inc. (b)........................................ 3,800 130,862
Tenet Healthcare Corp. ................................. 3,000 88,688
-----------
512,125
-----------
METAL FABRICATION -- 0.4%
Precision Castparts Corp. .............................. 1,700 101,363
Timken Co. ............................................. 2,100 74,681
-----------
176,044
-----------
METALS - DIVERSIFIED -- 0.3%
Phelps Dodge Corp. ..................................... 1,700 144,819
-----------
MOTOR VEHICLE PARTS -- 0.4%
Dana Corp. ............................................. 3,300 125,400
Magna International, Inc., Class A...................... 1,000 60,188
-----------
185,588
-----------
OIL & GAS -- 5.3%
Camco International, Inc. .............................. 1,400 76,650
Columbia Gas System, Inc. .............................. 1,600 104,400
Ensco International, Inc. (b)........................... 1,700 89,675
Exxon Corp. ............................................ 7,600 467,399
Kerr-McGee Corp. ....................................... 300 19,013
Mobil Corp. ............................................ 3,800 265,524
Murphy Oil Corporation.................................. 600 29,250
Parker & Parsley Petro Co. ............................. 3,200 113,200
Pennzoil Co. ........................................... 800 61,400
Philips Petroleum Co. .................................. 4,300 188,125
Royal Dutch Petroleum................................... 4,400 237,600
Smith International, Inc. (b)........................... 1,500 91,125
Texaco, Inc. ........................................... 2,200 239,250
Tidewater, Inc. ........................................ 6,000 264,000
USX-Marathon Group...................................... 5,900 170,363
Valero Energy Corp. .................................... 2,600 94,250
-----------
2,511,224
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
50
<PAGE> 53
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
PHARMACEUTICALS -- 5.0%
Abbott Laboratories..................................... 2,500 $ 166,875
Bergen Brunswig Corp., Class A.......................... 2,875 80,141
Bristol-Myers Squibb Co. ............................... 5,300 429,299
Cardinal Health, Inc. .................................. 1,450 83,013
Johnson & Johnson....................................... 6,100 392,687
Merck & Co., Inc. ...................................... 5,400 558,899
Perrigo Company (b)..................................... 5,600 70,000
Pfizer, Inc. ........................................... 1,800 215,100
Schering-Plough......................................... 6,500 311,188
Watson Pharmaceutical, Inc. (b)......................... 2,000 84,500
-----------
2,391,702
-----------
PUBLISHING -- 0.7%
American Greetings, Class A............................. 600 22,275
Houghton Mifflin Co. ................................... 400 26,700
New York Times Co., Class A............................. 3,900 196,950
Washington Post, Class B................................ 220 87,560
-----------
333,485
-----------
RAILROAD -- 0.4%
Norfolk Southern Corp. ................................. 2,100 211,575
-----------
RECREATIONAL VEHICLES -- 0.1%
Polaris Industries, Inc. ............................... 2,000 65,125
-----------
RESTAURANTS -- 0.1%
Applebee's International Inc. .......................... 2,700 72,225
-----------
RETAIL - APPAREL -- 0.9%
Liz Claiborne, Inc. .................................... 1,100 51,288
Ross Stores, Inc. ...................................... 3,300 107,869
TJX Companies, Inc. .................................... 10,200 269,024
-----------
428,181
-----------
RETAIL - FOOD STORES -- 0.3%
American Stores Co. .................................... 3,300 162,938
-----------
RETAIL - GEN MERCHANDISE -- 0.5%
Dayton Hudson Corp. .................................... 3,000 159,563
Family Dollar Stores, Inc. ............................. 2,900 79,025
-----------
238,588
-----------
RETAIL - OFFICE SUPPLY -- 0.3%
OfficeMax, Inc. (b)..................................... 5,700 82,294
U.S. Office Products Co. (b)............................ 1,900 58,069
-----------
140,363
-----------
RETAIL - SPECIALTY STORES -- 0.8%
Bed Bath & Beyond, Inc. (b)............................. 3,700 112,388
Home Depot, Inc. ....................................... 4,300 296,431
-----------
408,819
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
51
<PAGE> 54
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
SECURITY SERVICES -- 0.1%
Pittston Brink's Group.................................. 2,000 $ 60,000
-----------
STEEL -- 0.4%
AK Steel Holding Corp. ................................. 1,500 66,188
USX-U.S. Steel Group, Inc. ............................. 3,500 122,718
-----------
188,906
-----------
TELECOMMUNICATIONS -- 0.8%
Harris Corp. ........................................... 2,700 226,800
Lucent Technologies, Inc. .............................. 2,500 180,156
-----------
406,956
-----------
TELECOMMUNICATIONS - EQUIPMENT -- 0.5%
ADC Telecommunications, Inc. (b)........................ 2,500 83,438
Tellabs, Inc. (b)....................................... 3,200 178,800
-----------
262,238
-----------
TEXTILE -- 0.4%
Jones Apparel Group, Inc. (b)........................... 2,100 100,275
Tommy Hilfiger Corp. (b)................................ 2,200 88,413
-----------
188,688
-----------
TOBACCO -- 0.9%
Philip Morris Co., Inc. ................................ 9,200 408,250
Universal Corp. ........................................ 1,000 31,750
-----------
440,000
-----------
TOYS -- 0.3%
Hasbro, Inc. ........................................... 4,650 131,944
-----------
TRUCKING & SHIPPING -- 0.1%
CNF Transportation, Inc. ............................... 2,100 67,725
-----------
UTILITIES - ELECTRIC -- 2.6%
Boston Edison Co. ...................................... 4,200 110,775
CMS Energy Corp. ....................................... 4,700 165,675
Consolidated Edison Company of New York, Inc. .......... 3,800 111,863
DQE, Inc. .............................................. 4,300 121,475
FPL Group, Inc. ........................................ 4,100 188,855
GPU, Inc. .............................................. 8,100 290,587
Illinova Corp. ......................................... 4,800 105,600
Northern States Power................................... 1,800 93,150
Public Service Company of New Mexico.................... 5,000 89,375
-----------
1,277,355
-----------
UTILITIES - GAS & PIPELINE -- 0.4%
Consolidated Natural Gas Co. ........................... 900 48,431
MCN Corp. .............................................. 2,600 79,625
NICOR, Inc. ............................................ 2,200 78,925
-----------
206,981
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
52
<PAGE> 55
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
UTILITIES - TELEPHONE -- 3.0%
Ameritech Corp. ........................................ 4,000 $ 271,749
BellSouth Corp. ........................................ 6,600 306,074
LCI International, Inc. (b)............................. 5,500 120,313
SBC Communications, Inc. ............................... 4,300 266,063
Southern New England Telecommunications................. 2,000 77,750
U.S. West Communications Group.......................... 3,900 146,981
Worldcom, Inc. (b)...................................... 8,300 265,600
-----------
1,454,530
-----------
TOTAL COMMON STOCKS (COST $23,926,383).................... 29,157,091
-----------
INVESTMENT COMPANIES -- 9.8%
T. Rowe Price Foreign Equity Fund....................... 131,800 2,373,718
T. Rowe Price International Equity Fund................. 152,600 2,356,144
-----------
TOTAL INVESTMENT COMPANIES (COST $4,151,422).............. 4,729,862
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
CORPORATE BONDS -- 13.0%
BANKS -- 0.7%
Norwest Corp., 6.55, 12/1/06............................ $ 350,000 338,188
-----------
COMPUTERS - MAIN & MINI -- 1.0%
International Business Machines, 5.65, 1/22/98.......... 475,000 475,152
-----------
ELECTRICAL EQUIPMENT -- 1.0%
Honeywell, Inc., 6.75, 3/15/02.......................... 500,000 498,750
-----------
FINANCIAL SERVICES -- 3.9%
Chrysler Financial Corp., 6.95, 3/25/02................. 500,000 501,250
General Motors Acceptance Corp., 6.75, 2/7/02........... 500,000 498,750
Household Finance Corp., 6.875, 3/1/07.................. 250,000 245,313
Household Netherlands BV, 6.125, 3/1/03................. 100,000 95,375
International Lease Finance Corp., 6.875, 5/1/01........ 500,000 501,874
-----------
1,842,562
-----------
FOOD & RELATED -- 0.5%
Heinz Co., 6.875, 1/15/03............................... 100,000 100,375
Kellogg Co., 5.90, 7/15/97.............................. 150,000 150,007
-----------
250,382
-----------
INDUSTRIAL GOODS & SERVICES -- 1.0%
Xerox Corp., Putable 6/15/99, @ 100, 5.875, 6/15/37..... 500,000 500,625
-----------
PHARMACEUTICALS -- 1.0%
Smithkline Beecham Corp., 6.625, 10/1/01................ 500,000 497,500
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
53
<PAGE> 56
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
RETAIL - GENERAL MERCHANDISE -- 1.6%
J.C. Penney & Co., Putable 4/1/05, @ 100, 7.40,
4/1/37................................................ $ 250,000 $ 255,625
Sears Roebuck Acceptance, Putable 11/15/00, @ 100, 6.15,
11/5/05............................................... 500,000 492,499
-----------
748,124
-----------
TELECOMMUNICATIONS -- 0.5%
AT&T Corp., Callable 12/1/01, @ 105.56, 8.625,
12/1/31............................................... 250,000 265,000
-----------
TOBACCO -- 0.6%
Philip Morris Co., Inc., 7.50, 1/15/02.................. 300,000 304,875
-----------
UTILITIES - ELECTRIC -- 1.2%
Southern California Edison, 6.50, 6/1/01................ 590,000 584,838
-----------
TOTAL CORPORATE BONDS (COST $6,324,803)................... 6,305,996
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 10.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 3.6%
Federal Home Loan Mortgage Corporation, 8.00, 1/1/04.... 90,538 92,808
Federal Home Loan Mortgage Corporation, 7.00, 5/1/04.... 896,450 900,090
Federal Home Loan Mortgage Corporation, 6.50, 6/1/04.... 745,940 737,078
-----------
1,729,976
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 6.5%
Federal National Mortgage Association, 7.50, 6/1/03..... 434,134 440,959
Federal National Mortgage Association, 7.00, 6/1/04..... 440,000 441,650
Federal National Mortgage Association, 7.00, 6/1/04..... 599,494 601,736
Federal National Mortgage Association, 6.48, 6/28/04.... 500,000 495,225
Federal National Mortgage Association, 6.50, 1/1/06..... 152,096 148,928
Federal National Mortgage Association, 7.50, 5/1/07..... 403,801 409,212
Federal National Mortgage Association, 7.50, 10/1/11.... 123,350 125,117
Federal National Mortgage Association, 5.50, 12/25/14... 500,000 497,665
-----------
3,160,492
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$4,880,258)............................................. 4,890,468
-----------
U.S. TREASURY OBLIGATIONS -- 6.4%
TREASURY BILLS -- 0.1%
U.S. Treasury Bill, 8/14/97............................. 53,000 52,668
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
54
<PAGE> 57
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
- ---------------------------------------------------------- ---------- -----------
<S> <C> <C>
TREASURY NOTES -- 6.1%
U.S. Treasury Note, 6.375, 5/15/99...................... $ 100,000 $ 100,486
U.S. Treasury Note, 6.25, 8/31/00....................... 725,000 724,507
U.S. Treasury Note, 6.125, 9/30/00...................... 400,000 398,152
U.S. Treasury Note, 6.375, 3/31/01...................... 200,000 200,204
U.S. Treasury Note, 6.375, 9/30/01...................... 250,000 249,945
U.S. Treasury Note, 6.50, 5/15/05....................... 1,025,000 1,022,365
U.S. Treasury Note, 6.875, 5/15/06...................... 250,000 255,043
-----------
2,950,702
-----------
U.S. TREASURY BONDS -- 0.2%
U.S. Treasury Bond, 6.25, 8/15/23....................... 100,000 92,563
TOTAL U.S. TREASURY OBLIGATIONS (COST $3,092,774)......... 3,095,933
-----------
TOTAL INVESTMENTS (COST $42,375,640)(a) -- 99.6% 48,179,350
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4% 184,647
-----------
TOTAL NET ASSETS -- 100.0%................................ $48,363,997
===========
Percentages indicated are based on net assets of $48,363,997.
(a) Represents cost for financial reporting purposes and
differs from cost basis for federal income tax
purposes by the amount of losses recognized for
financial reporting purposes in excess of federal
income tax reporting of approximately $7,890. Cost for
federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
Unrealized appreciation................................. $6,037,362
Unrealized depreciation................................. (233,652)
----------
Net unrealized appreciation............................. $5,803,710
==========
(b) Represents non-income producing securities.
</TABLE>
- ---------------
See Notes to Financial Statements.
55
<PAGE> 58
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements
June 30, 1997
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Time Horizon Funds (the "Company"), a Delaware business trust, is registered
under the Investment Company Act of 1940 as amended (the "Act"), as an open-end
management investment company. At June 30, 1997, the Company operated as a
series company comprised of three funds. The accompanying financial statements
and notes are those of 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 has A
Shares, B Shares, and effective July 22, 1996, began offering K Shares. A
Shares, B Shares and K Shares have a Shareholder Service Plan. In addition B
Shares have a Distribution Service Plan, and K Shares have a Distribution and
Administrative Services Plan and an Administrative Services Plan.
The three classes vary in types of sales loads. A Shares are offered at net
asset value without a sales load effective June 16, 1997, and are subject to a
shareholder servicing fee. Prior to June 16, 1997, A Shares were offered at net
asset value plus a 4.50% sales charge. B Shares are offered at net asset value
but are subject to a contingent deferred sales charge consistent with the Funds'
prospectus. In addition, B Shares pay ongoing distribution fees and shareholder
servicing fees. B Shares will convert to A Shares on the first business day of
the month following the eighth anniversary of the date of purchase. K Shares are
offered at net asset value without an initial sales charge or a contingent
deferred sales charge, but are subject to distribution or administrative
services fees and shareholder servicing fees. A, B, and K Shares of each Fund
may be exchanged for like shares of another Time Horizon Fund or a Pacific
Horizon Fund with no sales charges or redemption fees, as described in the
Funds' prospectus.
The Time Horizon Funds' investment objective is to provide long term
investors maximum total return over a stated investment time period while
increasingly emphasizing capital preservation as each Fund approaches its target
time horizon as described in the prospectus. The Funds invest primarily in
equity and fixed income securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the
Continued
56
<PAGE> 59
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1997
- --------------------------------------------------------------------------------
Funds' Manager, providing investment advisory and administrative services. BISYS
Fund Services Ohio, Inc. ("BISYS"), serves as the Funds' sub-administrator.
Concord Financial Group, Inc. (the "Distributor"), an indirect, wholly-owned
subsidiary of BISYS serves as the distributor of the Funds' shares. BISYS also
serves as fund accountant, transfer agent and dividend disbursing agent of the
Funds.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
The Funds value portfolio securities (other than debt securities with
remaining maturities of 60 days or less) at the last reported sales price on the
securities exchange on which such securities are primarily traded or at the last
sales price on the NASDAQ National Securities Market. Securities not listed on
an exchange or the NASDAQ National Securities Market or securities for which
there were no transactions are valued at the last current bid quotation if
market quotations are available. The Funds may also use an independent pricing
service, approved by the Board of Trustees, to value certain of their
securities. Such prices reflect market values which may be established through
the use of electronic data processing techniques and matrix systems. Restricted
securities and securities for which market quotations are not readily available,
if any, are valued at fair value using methods approved by the Board of
Trustees. Debt securities with remaining maturities of 60 days or less are
valued at amortized cost which approximates market value.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recognized on the ex-dividend date. Realized gains and
losses from secur-
Continued
57
<PAGE> 60
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1997
- --------------------------------------------------------------------------------
ity transactions are recorded on an identified cost basis.
EXPENSES:
The Company accounts separately for the assets, liabilities and operations
of each fund. Direct expenses of a fund are charged to the fund while general
Company expenses are allocated pro-rata among the Company's respective
portfolios.
The investment income and expenses of a fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of a fund
are allocated to each class of shares based upon their relative net asset value
on the date income is earned or expenses and realized and unrealized gains and
losses are incurred.
The Funds incurred certain costs in connection with its organization. Such
costs have been deferred and are being amortized on a straight line basis over
five years. 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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
The Funds' net investment income is declared and paid as a dividend annually
to shareholders of record at the close of business on record date. Net realized
gains on portfolio securities, if any, are distributed at least annually.
However, to the extent that net realized gains of the Funds can be offset by
capital loss carryovers of the Funds, such gains will not be distributed.
Dividends and distributions are recorded by the Funds on the ex-dividend date.
The amount of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed
Continued
58
<PAGE> 61
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1997
- --------------------------------------------------------------------------------
net investment income and net realized capital gains for financial reporting
purposes, but not for tax purposes, are reported as dividends in excess of net
investment income or distributions in excess of net realized gains. To the
extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of capital.
As of June 30, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
NET
ACCUMULATED REALIZED
UNDISTRIBUTED GAIN/
NET INVESTMENT (LOSS) ON
INCOME/(LOSS) INVESTMENTS
-------------- -----------
<S> <C> <C>
Portfolio 1.... $ 303 $(303)
Portfolio 2.... 208 (208)
Portfolio 3.... (676) 676
</TABLE>
FEDERAL INCOME TAXES:
It is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
timely all of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
FUTURES:
The Funds may enter into futures contracts. A futures contract is an
agreement to purchase or sell a specified quantity of an underlying instrument
at a specified future date, or to make or receive a cash payment based on the
value of a securities index. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" such contract on a daily basis to reflect the
market value of the contract at the end of each day's trading. Such unrealized
gains and losses are included in the caption "Net unrealized appreciation on
investment transactions and futures contracts" in the Statement of Assets and
Liabilities. The Funds agree to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in the value of the contract, such as
receipts or payments, are known as "variation margin" and are included as a
payable or receivable in the Statement of Assets and Liabilities. When the
futures contract is closed, the Funds record a realized gain or loss equal to
the difference between the proceeds from (or cost of) the closing transaction
and the Funds' basis in the contract. Such gains or losses are included in the
cap-
Continued
59
<PAGE> 62
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1997
- --------------------------------------------------------------------------------
tion "Accumulated net realized gain on investment transactions and futures
contracts" in the Statement of Assets and Liabilities.
During the fiscal year ended June 30, 1997, the Funds entered into futures'
contracts to hedge a portion of their portfolio. The use of futures contracts
involves, to varying degrees, elements of market risk. Risks arise from the
possible imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts. However, the Funds'
activities in futures contracts are conducted through regulated exchanges which
minimize counterparty credit risks.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from financial institutions,
such as banks and broker dealers, which Bank of America 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 Funds' custodian and other banks acting in a sub-custodian capacity take
possession of the collateral pledged for investments in repurchase agreements.
The underlying collateral is valued daily on a mark-to-market basis to determine
that the value, including accrued interest, exceeds the repurchase price. In the
event of the seller's default of the obligation to repurchase, the Funds have
the right to liquidate the collateral and apply the proceeds in satisfaction of
the obligation. Under certain circumstances, in the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral may be subject to legal proceedings.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Bank of America serves as the Funds' Manager, providing investment advisory
and administrative services. Under the terms of the Management Agreement with
the Company, Bank of America is entitled to receive fees from the Funds, which
is accrued daily and payable monthly, at an annual rate of 0.60% of the Funds'
average daily net assets.
Pursuant to the authority granted in its Management Agreement, Bank of
America has entered into a Sub-Administration Agreement with BISYS under which
BISYS will per-
Continued
60
<PAGE> 63
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1997
- --------------------------------------------------------------------------------
form certain of the services to be provided under the Management Agreement.
BISYS also serves as fund accountant and transfer and dividend disbursing
agent of the Funds. Fund accounting fees are computed based upon the greater of
$2,500 monthly or the following annual fee schedule: 0.0125% of average net
assets between $10 million and $50 million; 0.025% of average net assets between
$50 million and $200 million; 0.020% of next $200 million and $500 million of
average net assets; and 0.015% of average net assets greater than $500 million.
In its capacity as transfer agent and dividend disbursing agent, BISYS
earned $56,005, $61,572 and $70,883 from Portfolio 1, Portfolio 2 and Portfolio
3, respectively, for the year ended June 30, 1997. BISYS agreed to waive its
transfer agent fees for the first full year of the Funds' operations. The period
July 1, 1996 through August 31, 1996 were within the first year of operations,
and accordingly BISYS waived $7,007, $8,200 and $8,967 for Portfolio 1,
Portfolio 2 and Portfolio 3, respectively. In addition, for the period January
1, 1996 to December 31, 1996 BISYS agreed to voluntarily limit aggregate
transfer agency fees. Absent this voluntary limit the Funds would have incurred
additional costs of $18,076, $21,482 and $23,722 for Portfolio 1, Portfolio 2
and Portfolio 3, respectively.
Concord Financial Group, Inc. serves as distributor of the Funds' shares.
For the year ended June 30, 1997, the Distributor retained $5,014, $13,963, and
$15,772 in commissions earned on sales of shares and $61,587, $111,139 and
$135,786 was reallowed to other broker/ dealers for Portfolio 1, Portfolio 2 and
Portfolio 3, respectively.
BISYS and the Distributor are each wholly-owned subsidiaries of The BISYS
Group, Inc.
The Company has adopted a Shareholder Service Plan for A Shares, B Shares,
and K Shares, under which the Funds reimburse the Distributor and Service
Organizations, as defined in the prospectus, for shareholder servicing fees
incurred by each respective Class. Under the Shareholder Service Plan, payments
by the Funds for shareholder servicing expenses may not exceed an annual rate of
0.25% of the Funds' average daily net assets. For the year ended June 30, 1997,
the Funds were advised that the Distributor retained $2,176 and $2,625 pursuant
to the Share-
Continued
61
<PAGE> 64
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1997
- --------------------------------------------------------------------------------
holder Services Plan for Portfolio 1 and Portfolio 2, respectively. For the same
period, Bank of America and its affiliates earned the following amounts pursuant
to the Shareholder Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
- -------------------------- ----------
<S> <C>
Portfolio 1............... $ 64,167
Portfolio 2............... 70,519
Portfolio 3............... 71,805
</TABLE>
The Company has also adopted a Distribution Service Plan pursuant to Rule
12b-1 under the Act, under which the B Shares of each Fund compensate the
Distributor for services rendered and costs incurred in connection with
distribution of the B Shares. Under the Distribution Service Plan, payments by
the B Shares of a Fund for distribution expenses incurred may not exceed the
annual rate of 0.75% of the average daily net assets of the Fund attributable to
the B Shares. For the year ended June 30, 1997, the Funds were advised that the
Distributor retained $378 for Portfolio 3. For the same period, the Funds were
advised that Bank of America and its affiliates earned the following amounts
pursuant to the Distribution Service Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
- ---------------------------- ----------
<S> <C>
Portfolio 1................. $ 192,952
Portfolio 2................. $ 201,273
Portfolio 3................. $ 203,147
</TABLE>
The Company has adopted two forms of plans for K Shares pursuant to Rule
12b-1 under the Act: an Administrative Services Plan under which the K Shares of
the Funds may reimburse the Distributor for administrative expenses incurred in
connection with sales of shares to investors subject to ERISA; and a
Distribution and Administrative Services Plan under which the K Shares of the
Funds may compensate the Distributor for distribution and administrative
services rendered and costs incurred in connection with distribution of the K
Shares. The total of all 12b-1 distribution fees and administrative services
fees paid under both the Administrative Services Plan and the Distribution and
Administrative Services Plan may not exceed, in the aggregate, the annual rate
of 0.75% of the average daily net assets of a Funds' K Shares. For the year
ended June 30, 1997, the Distributor retained $19, $121, and $112 for Portfolio
1, Portfolio 2 and Portfolio 3, respectively.
Continued
62
<PAGE> 65
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1997
- --------------------------------------------------------------------------------
For the year ended June 30, 1997, Portfolio 1, Portfolio 2 and Portfolio 3
incurred legal charges totaling $29,694, $33,902 and $39,020, respectively,
which were earned by a law firm, a partner of which serves as Assistant
Secretary of the Company.
Certain officers of the Company are affiliated with BISYS. Such persons are
not paid directly by the Company for serving in those capacities.
Bank of America and/or the Distributor have agreed to voluntarily waive
their fees and/or reimburse operating expenses to ensure that the total
operating expenses for each Fund do not exceed 1.20%, 1.95%, and 1.70%
(annualized) of the average net assets of each Fund's Class A, Class B, and
Class K Shares, respectively. Bank of America retains the right to terminate
this arrangement at any time.
Information regarding related party transactions is as follows for the year
ended June 30, 1997:
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------- ----------- -----------
<S> <C> <C> <C>
MANAGEMENT FEES:
Annual fee before waivers (Percentage of average
net assets)..................................... .60% .60% .60%
Waivers........................................... $ 178,618 $ 188,559 $ 183,426
12B-1 FEES:
Annual fee before waivers
(Percentage of average net assets)(Class B)..... .75% .75% .75%
(Percentage of average net assets)(Class K)..... .75% .75% .75%
Waivers (Class K)................................. $ 3 $ 8 $ 4
SHAREHOLDER SERVICES FEES: (CLASS A, B, AND K)
Annual fee before waivers
(Percentage of average net assets).............. .25% .25% .25%
Waivers (Class A)................................. $ 5,843 $ 5,775 $ 5,176
Waivers (Class B)................................. $ 12,208 $ 11,322 $ 11,589
EXPENSES REIMBURSED:.............................. $ 14,650 $ 13,823 $ 16,773
FUND ACCOUNTING FEES:............................. $ 30,342 $ 30,262 $ 30,228
TRANSFER AGENT FEES:.............................. $ 56,005 $ 61,572 $ 70,883
Waivers......................................... $ 7,007 $ 8,200 $ 8,967
</TABLE>
Continued
63
<PAGE> 66
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1997
- --------------------------------------------------------------------------------
NOTE 4 -- SECURITIES TRANSACTIONS
For the year ended June 30, 1997, the cost of purchases and the proceeds
from sales of Portfolio 1, Portfolio 2, and Portfolio 3 Fund's securities
(excluding short-term investments) amounted to:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Portfolio 1... $34,034,803 $23,290,655
Portfolio 2... 41,812,328 26,832,600
Portfolio 3... 47,081,935 27,914,715
</TABLE>
NOTE 5 -- FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Portfolio 2 and Portfolio 3 had a tax year end of April 30, 1997. These
Funds have changed their tax year to June 30, 1997.
During the years ended April 30, 1997 and June 30, 1997, respectively, the
Funds declared long-term capital distributions in the following amounts:
<TABLE>
<CAPTION>
4/30/97 6/30/97
------- -------
<S> <C> <C>
Portfolio 1.......... N/A $59,279
Portfolio 2.......... $2,714 $ 0
Portfolio 3.......... $3,050 $ 0
</TABLE>
For the taxable years ended April 30, 1997 and June 30, 1997, respectively,
the following percentage of income dividends paid by the Funds qualify for the
dividends received deduction available to corporations:
<TABLE>
<CAPTION>
QUALIFIED QUALIFIED
DIVIDEND DIVIDEND
INCOME INCOME
4/30/97 6/30/97
-------- --------
<S> <C> <C>
Portfolio 1...... N/A 17.42%
Portfolio 2...... 20.49% 0%
Portfolio 3...... 27.48% 0%
</TABLE>
64
<PAGE> 67
TIME HORIZON PORTFOLIO 1
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996(a)
------------- ----------------
<S> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR........... $ 10.65 $ 10.04(d)
------- -------
Income from Investment Operations:
Net investment income................................ 0.38 0.22
Net realized and unrealized gains on investment
transactions....................................... 0.99 0.45
------- -------
Total income from investment operations................ 1.37 0.67
------- -------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income............................................. (0.31) (0.06)
Distributions to shareholders from net realized gains
on investment transactions......................... (0.04) --
------- -------
Total Dividends and Distributions:..................... (0.35) (0.06)
------- -------
Net change in net asset value per share................ 1.02 0.61
------- -------
NET ASSET VALUE PER SHARE, END OF YEAR................. $ 11.67 $ 10.65
======= =======
Total return........................................... 13.13% 6.68%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)...................... $ 8,384 $ 7,172
Ratio of expenses to average net assets.............. 0.99% 0.49%(c)
Ratio of net investment income to average net
assets............................................. 3.62% 3.96%(c)
Ratio of expenses to average net assets*............. 1.67% 2.95%(c)
Ratio of net investment income to average net
assets*............................................ 2.94% 1.50%(c)
Portfolio turnover rate**............................ 73% 72%
Average commission rate paid(e)...................... $0.0521 $ 0.0652
</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 September 5, 1995 (inception date) to June 30, 1996.
(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 the public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
65
<PAGE> 68
TIME HORIZON PORTFOLIO 1
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996(a)
------------- ----------------
<S> <C> <C>
B SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR.............. $ 10.60 $ 10.04(d)
------- -------
Income from Investment Operations:
Net investment income................................... 0.26 0.18
Net realized and unrealized gains on investment
transactions.......................................... 1.03 0.43
------- -------
Total income from investment operations................... 1.29 0.61
------- -------
Less Dividends and Distributions:
Dividends to shareholders from net investment income.... (0.25) (0.05)
Distributions to shareholders from net realized gains on
investment transactions............................... (0.04) --
------- -------
Total Dividends and Distributions:........................ (0.29) (0.05)
------- -------
Net change in net asset value per share................... 1.00 0.56
------- -------
NET ASSET VALUE PER SHARE, END OF YEAR.................... $ 11.60 $ 10.60
======= =======
Total return (excludes sales charge)...................... 12.36% 6.09%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)......................... $31,609 $ 18,681
Ratio of expenses to average net assets................. 1.77% 1.29%(c)
Ratio of net investment income to average net assets.... 2.85% 3.16%(c)
Ratio of expenses to average net assets*................ 2.43% 3.65%(c)
Ratio of net investment income to average net assets*... 2.19% 0.80%(c)
Portfolio turnover rate**............................... 73% 72%
Average commission rate paid(e)......................... $0.0521 $ 0.0652
</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 September 5, 1995 (inception date) to June 30, 1996.
(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 the public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
66
<PAGE> 69
TIME HORIZON PORTFOLIO 1
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1997(a)
-----------------
<S> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD........................ $ 10.41
-------
Income from Investment Operations:
Net investment income............................................... 0.36
Net realized and unrealized gains on investment transactions........ 1.16
-------
Total income from investment operations............................... 1.52
-------
Less Dividends and Distributions:
Dividends to shareholders from net investment income................ (0.28)
Distributions to shareholders from net realized gains on investment
transactions...................................................... (0.04)
-------
Total Dividends and Distributions:.................................... (0.32)
-------
Net change in net asset value per share............................... 1.20
-------
NET ASSET VALUE PER SHARE, END OF PERIOD.............................. $ 11.61
=======
Total return.......................................................... 14.78%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)..................................... $ 16
Ratio of expenses to average net assets............................. 1.60%(c)
Ratio of net investment income to average net assets................ 2.98%(c)
Ratio of expenses to average net assets*............................ 2.19%(c)
Ratio of net investment income to average net assets*............... 2.39%(c)
Portfolio turnover rate**........................................... 73%
Average commission rate paid(d)..................................... $0.0521
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/ or reimbursed.
If such voluntary fee reductions and/ or reimbursements had not occurred,
the ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from July 22, 1996 (inception date) to June 30, 1997.
(b) Not annualized.
(c) Annualized.
(d) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
67
<PAGE> 70
TIME HORIZON PORTFOLIO 2
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR PERIOD ENDED
ENDED JUNE 30, 1996
JUNE 30, 1997 (a)
------------- ----------------
<S> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR....... $ 10.73 $ 10.04(d)
------- -------
Income from Investment Operations:
Net investment income............................ 0.31 0.21
Net realized and unrealized gains on investment
transactions................................... 1.39 0.54
------- -------
Total income from investment operations............ 1.70 0.75
------- -------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income......................................... (0.28) (0.06)
------- -------
Net change in net asset value per share............ 1.42 0.69
------- -------
NET ASSET VALUE PER SHARE, END OF YEAR............. $ 12.15 $ 10.73
======= =======
Total return....................................... 16.05% 7.48%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000).................. $10,899 $ 7,389
Ratio of expenses to average net assets.......... 0.99% 0.50%(c)
Ratio of net investment income to average net
assets......................................... 3.14% 3.72%(c)
Ratio of expenses to average net assets*......... 1.63% 3.12%(c)
Ratio of net investment income to average net
assets*........................................ 2.50% 1.10%(c)
Portfolio turnover rate**........................ 78% 72%
Average commission rate paid (e)................. $0.0519 $ 0.0592
</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 September 5, 1995 (inception date) to June 30, 1996.
(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 the public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
68
<PAGE> 71
TIME HORIZON PORTFOLIO 2
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR PERIOD ENDED
ENDED JUNE 30, 1996
JUNE 30, 1997 (a)
------------- ----------------
<S> <C> <C>
B SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR....... $ 10.68 $ 10.04(d)
------- -------
Income from Investment Operations:
Net investment income............................ 0.22 0.15
Net realized and unrealized gains on investment
transactions................................... 1.37 0.54
------- -------
Total income from investment operations............ 1.59 0.69
------- -------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income......................................... (0.22) (0.05)
------- -------
Net change in net asset value per share............ 1.37 0.64
------- -------
NET ASSET VALUE PER SHARE, END OF YEAR............. $ 12.05 $ 10.68
======= =======
Total return (excludes sales charge)............... 15.04% 6.88%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000).................. $33,965 $ 18,350
Ratio of expenses to average net assets.......... 1.77% 1.32%(c)
Ratio of net investment income to average net
assets......................................... 2.37% 2.92%(c)
Ratio of expenses to average net assets*......... 2.39% 3.87%(c)
Ratio of net investment income to average net
assets*........................................ 1.75% 0.37%(c)
Portfolio turnover rate**........................ 78% 72%
Average commission rate paid (e)................. $0.0519 $ 0.0592
</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 September 5, 1995 (inception date) to June 30, 1996.
(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 the public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
69
<PAGE> 72
TIME HORIZON PORTFOLIO 2
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1997(a)
----------------
<S> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD..................... $ 10.39
-------
Income from Investment Operations:
Net investment income............................................ 0.29
Net realized and unrealized gains on investment transactions..... 1.61
-------
Total income from investment operations............................ 1.90
-------
Less Dividends and Distributions:
Dividends to shareholders from net investment income............. (0.26)
-------
Net change in net asset value per share............................ 1.64
-------
NET ASSET VALUE PER SHARE, END OF PERIOD........................... $ 12.03
=======
Total return....................................................... 18.49%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000).................................. $ 100
Ratio of expenses to average net assets.......................... 1.59%(c)
Ratio of net investment income to average net assets............. 2.50%(c)
Ratio of expenses to average net assets*......................... 2.20%(c)
Ratio of net investment income to average net assets*............ 1.89%(c)
Portfolio turnover rate**........................................ 78%
Average commission rate paid (d)................................. $ 0.0519
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/ or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from July 22, 1996 (inception date) to June 30, 1997.
(b) Not annualized.
(c) Annualized.
(d) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
70
<PAGE> 73
TIME HORIZON PORTFOLIO 3
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996(a)
-------------- ----------------
<S> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR......... $ 10.94 $ 10.04(d)
------- -------
Income from Investment Operations:
Net investment income.............................. 0.23 0.18
Net realized and unrealized gains on investment
transactions..................................... 2.00 0.77
------- -------
Total income from investment operations.............. 2.23 0.95
------- -------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income........................................... (0.22) (0.05)
------- -------
Net change in net asset value per share.............. 2.01 0.90
------- -------
NET ASSET VALUE PER SHARE, END OF YEAR............... $ 12.95 $ 10.94
======= =======
Total return......................................... 20.62% 9.46%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000).................... $ 10,483 $ 6,033
Ratio of expenses to average net assets............ 0.99% 0.51%(c)
Ratio of net investment income to average net
assets........................................... 2.38% 3.29%(c)
Ratio of expenses to average net assets*........... 1.66% 3.32%(c)
Ratio of net investment income to average net
assets*.......................................... 1.71% 0.48%(c)
Portfolio turnover rate**.......................... 84% 66%
Average commission rate paid(e).................... $ 0.0484 $ 0.0584
</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 September 5, 1995 (inception date) to June 30, 1996.
(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 the public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
71
<PAGE> 74
TIME HORIZON PORTFOLIO 3
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996(a)
------------- ----------------
<S> <C> <C>
B SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR.......... $ 10.90 $ 10.04(d)
------- -------
Income from Investment Operations:
Net investment income............................... 0.14 0.12
Net realized and unrealized gains on investment
transactions...................................... 1.98 0.78
------- -------
Total income from investment operations............... 2.12 0.90
------- -------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income............................................ (0.16) (0.04)
------- -------
Net change in net asset value per share............... 1.96 0.86
------- -------
NET ASSET VALUE PER SHARE, END OF YEAR................ $ 12.86 $ 10.90
======= =======
Total return (excludes sales charge).................. 19.66% 8.98%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)..................... $37,787 $ 16,441
Ratio of expenses to average net assets............. 1.76% 1.34% (c)
Ratio of net investment income to average net
assets............................................ 1.59% 2.47%(c)
Ratio of expenses to average net assets*............ 2.40% 4.08%(c)
Ratio of net investment income to average net
assets*........................................... 0.95% (0.27%)(c)
Portfolio turnover rate**........................... 84% 66%
Average commission rate paid(e)..................... $0.0484 $ 0.0584
</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 September 5, 1995 (inception date) to June 30, 1996.
(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 the public).
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
72
<PAGE> 75
TIME HORIZON PORTFOLIO 3
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1997(a)
----------------
<S> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD....................... $ 10.48
-------
Income from Investment Operations:
Net investment income.............................................. 0.25
Net realized and unrealized gains on investment transactions....... 2.34
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Total income from investment operations.............................. 2.59
-------
Less Dividends and Distributions:
Dividends to shareholders from net investment income............... (0.18)
-------
Net change in net asset value per share.............................. 2.41
-------
NET ASSET VALUE PER SHARE, END OF PERIOD............................. $ 12.89
-------
Total return......................................................... 24.94%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000).................................... $ 94
Ratio of expenses to average net assets............................ 1.59%(c)
Ratio of net investment income to average net assets............... 1.53%(c)
Ratio of expenses to average net assets*........................... 2.11%(c)
Ratio of net investment income to average net assets*.............. 1.01%(c)
Portfolio turnover rate**.......................................... 84%
Average commission rate paid(d).................................... $ 0.0484
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(a) Period from July 22, 1996 (inception date) to June 30, 1997.
(b) Not annualized.
(c) Annualized.
(d) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the fund as a
whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
73
<PAGE> 76
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
...............................................................................
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.
<TABLE>
[ ] THE TIME HORIZON FUNDS
<S> <C>
[ ] 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
</TABLE>
Additional Comments:
...............................................................................
...............................................................................
...............................................................................
...............................................................................
...............................................................................
...............................................................................
<PAGE> 77
TMH-0059
<PAGE> 78
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
Time Horizon Funds
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolio investments, of Time Horizon Funds
(comprising, respectively, the Time Horizon Portfolio 1, Time Horizon Portfolio
2 and Time Horizon Portfolio 3, (collectively the "Funds")) as of June 30, 1997,
and the related statements of operations for the year then ended, and the
statements of changes in net assets and financial highlights for the year ended
June 30, 1997 and the period from September 5, 1995 (commencement of operations)
to June 30, 1996. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the Time Horizon Funds as of June
30, 1997, the results of their operations for the year then ended, and changes
in their net assets and the financial highlights for the year ended June 30,
1997 and the period from September 5, 1995 (commencement of operations) to June
30, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
August 8, 1997
74
