<PAGE> 1
TIME HORIZON FUNDS
PORTFOLIO 1
PORTFOLIO 2
PORTFOLIO 3
ANNUAL REPORT
JUNE 30, 1998
[TIME HORIZON FUNDS LOGO]
NOT FDIC INSURED
<PAGE> 2
TIME HORIZON FUNDS
103 Bellevue Parkway, Wilmington, DE 19809
1-800-247-9728
<TABLE>
<S> <C>
MANAGER INDEPENDENT ACCOUNTANTS
Bank of America National Trust and PricewaterhouseCoopers LLP
Savings Association 1177 Avenue of the Americas
555 California Street New York, NY 10036
San Francisco, CA 94104
DISTRIBUTOR FUND COUNSEL
Provident Distributors, Inc. Vedder, Price, Kaufman
Four Falls Corporate Center & Kammholz
6th Floor 222 N. LaSalle Street
W. Conshohocken, PA 19428 Chicago, IL 60601
</TABLE>
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.
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 3
Contents
<TABLE>
<S> <C>
UNDERSTANDING YOUR
SHAREHOLDER REPORT 2-4
TIME HORIZON FUND FACTS 5
LETTER FROM THE MANAGER 6-8
INTERVIEW WITH THE TIME HORIZON
FUNDS INVESTMENT MANAGEMENT
TEAM 9-20
SCHEDULES OF PORTFOLIO
INVESTMENTS 21-57
STATEMENTS OF ASSETS
AND LIABILITIES 58
STATEMENTS OF OPERATIONS 59
STATEMENTS OF CHANGES
IN NET ASSETS 60-61
NOTES TO FINANCIAL STATEMENTS 62-70
FINANCIAL HIGHLIGHTS 71-79
REPORT OF INDEPENDENT AUDITORS 80
</TABLE>
<PAGE> 4
UNDERSTANDING YOUR SHAREHOLDER REPORT
As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.
This guide will help you extract the
information from the report.
The TABLE OF CONTENTS helps you locate
the information you want.
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.
LOGO
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.
LOGO
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
[CHART]
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
[Graphic of Schedules INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
of Portfolio Investments] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
PORTFOLIO HOLDINGS WITH SHARES AND MARKET VALUE
AS OF REPORT DATE
The STATEMENTS OF ASSETS AND LIABILITIES list all the assets and liabilities of
the Funds as of the date of the Statements. This is an individual fund's
"balance sheet." Also disclosed in the Statements are the Funds' net asset
values per share and their maximum offering prices per share as of the date of
the Statements. The Statements also list the accounts that comprise the Funds'
net assets (capital stock, undistributed income, etc.).
[Graphic of Statements SUMMARY OF THE FUND'S INVESTMENTS AND ALL OTHER
of Assets and Liabilities] ASSETS OWNED BY THE FUND, INCLUDING AMOUNTS
OWED TO THE FUND BY OUTSIDE PARTIES
SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND
NET RESULTS OF ASSETS LESS LIABILITIES
THE MARKET VALUE OF THE FUND'S TOTAL NET ASSETS
DIVIDED BY THE NUMBER OF SHARES OUTSTANDING
THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY
3
<PAGE> 6
The STATEMENTS OF OPERATIONS show the amount of dividend and interest income
earned from each Fund's investments, the expenses incurred by the Funds from
their operations and any gains or losses, both realized and unrealized, by the
Funds from holding and/or selling any investments.
INCOME EARNED FROM THE FUND'S INVESTMENTS
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
[STATEMENT OF OPERATIONS
TABLE] 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
[STATEMENT OF CHANGES IN NET
ASSETS TABLE] 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 and the ratio of net investment income to average net assets.
4
<PAGE> 7
TIME HORIZON FUND FACTS
The Time Horizon Funds offer three asset allocation 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.
[CAPTION]
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
<S> <C> <C> <C>
TIME HORIZON 2005 2015 2025
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
ASSET ALLOCATION(1)
(AS OF 06/30/98) [PIE CHART] [PIE CHART] [PIE CHART]
- ----------------------------------------------------------------------------------------
CURRENT ALLOCATION RANGES(2)
STOCKS 15%-45% 30%-70% 40%-100%
BONDS 55%-85% 30%-70% 0%-60%
CURRENT TARGET
ASSET ALLOCATION [PIE CHART] [PIE CHART] [PIE CHART]
- ----------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(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
<PAGE> 8
LETTER FROM THE MANAGER
Dear Shareholder:
The Time Horizon Funds completed the year again with
solid total returns in an environment that continued to
be favorable to stocks and reasonable to fixed-income
securities. The broad U.S. stock market gained 17.71%
and 30.18% for the six and twelve months ended June 30,
1998, respectively. Intermediate-term U.S. bonds
delivered total returns of 3.92% and 10.54% for six
months and one year, respectively. Overseas, where
economic conditions are mixed, equity securities
advanced 16.02% and 6.37% during the six and twelve
month periods, respectively.*
<TABLE>
<S> <C>
[PHOTO OF JOHNSON]
</TABLE>
David R. Johnsen
Senior Vice
President
Bank of America
NT&SA
Investment Advisors
Division
Mr. Johnsen plays a
key role in the
portfolio
management of the
Time Horizon Funds
FAVORABLE CONDITIONS FOR FINANCIAL ASSETS
The U.S. securities market continues to be the beneficiary of low inflation,
steady real economic growth and wage increases being offset by productivity
gains. These are the conditions that are favorable to business earnings and the
performance of financial assets, especially equities. Although year over year
growth of corporate earnings slowed, they grew at a higher-than-expected rate
again during the past one-year period. This gave investors reason to be
optimistic about further earnings gain.
This belief, along with the steady flow of money flowing to mutual funds and
into retirement vehicles by Americans, helped boost the prices of U.S. stocks
and bonds. Another possible contributing factor was the reduced capital gains
tax rate, which makes the after-tax returns of investing in equity securities
more attractive.
For the third 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
30.18%, compared to a return of 27.08% for the S&P 400, an index of middle-
capitalization stocks, and 19.47% gain for the S&P 600, a small-capitalization
index.**
Since October of 1997, the fixed income market has been uncertain as to whether
unemployment and strong domestic consumer demand would overheat the economy, or
if the Asian turmoil would slow the U.S. economy to the point of recession. This
scenario has left the Federal
- ---------------
* As measured by the Standard & Poor's 500 Index of Large-Cap Common Stocks;
the Lehman Brothers Aggregate Bond Index, and the Morgan Stanley Capital
International (MSCI) Europe, Australia and Far East (EAFE) Index from 7/1/97
through 6/30/98. These indices are representative of the large capitalization
U.S. equity, U.S. bond, and International markets, respectively. Each index
cannot be invested in directly.
** 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 7/1/97 through 6/30/98. These indices are representative
of the large, middle and small-capitalization U.S. equity markets,
respectively. Each index cannot be invested in directly.
6
<PAGE> 9
Reserve Board's monetary policy on hold. While overall interest rate volatility
has remained low, levels in the longer maturity range have declined and quality
spreads have widened. The third and fourth quarter of 1998 will most likely
provide an answer to which outcome will prevail.
SMALL-CAP STOCKS INTRODUCED
Since reaching the target investment allocation outlined in the Funds'
prospectus last year, we have lowered our targeted proportion of equities in the
Time Horizon Funds, and have also introduced smaller-capitalization stocks in
Portfolios 2 and 3. This lowering of proportion of equities and adding small-cap
equities began late in the first quarter of 1998 and may continue throughout
1998. Each Fund continues to be diversified within and across a combination of
four asset classes -- U.S. stocks, foreign stocks, bonds and cash.
We continue 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 approaches target
maturity, we will continue to modify the Funds' asset combinations to achieve an
increasingly conservative risk/reward ratio. Over time, the proportion of
equities in your Fund may continually be reduced, the average maturity of the
fixed-income investments may grow smaller, or other steps may be taken to keep
the Fund's overall risk level consistent 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.
During the fiscal year ended June 30, 1998, A shares were offered without a
front-end sales charge, 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.
As we continue to fine tune each portfolio, 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 your
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
<PAGE> 10
TIME HORIZON FUNDS
RESULTS (UNAUDITED) OF SPECIAL SHAREHOLDER MEETING
HELD ON JUNE 26, 1998
On June 26, 1998, a special meeting of shareholders of Time Horizon Funds (the
"Trust") was held in order to vote on the following proposals:
(1) to elect six Trustees to the Board of Trustees;
(2) to approve an Investment Advisory Agreement between the Trust and Bank
of America NT&SA;
(3) to approve a new investment advisory agreement between the Trust and
Bank of America NT&SA in connection with the merger of BankAmerica
Corporation and NationsBank Corporation; and
(4) to approve the selection of Price Waterhouse LLP as the Trust's
independent auditors for the current fiscal year.
The voting results for each proposal are shown below:
<TABLE>
<CAPTION>
SHARES
VOTE SHARES REPRESENTED ABSTAINED/
PROPOSAL BASIS* OUTSTANDING AT THE MEETING IN FAVOR OPPOSED WITHHELD
-------- ------ ----------- -------------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
PROPOSAL 1 by Trust 11,201,304 10,531,504
Edward S. Bottum 10,370,264 0 161,240
William P. Carmichael 10,372,590 0 158,914
Thomas M. Collins 10,378,355 0 153,149
Douglas B. Fletcher 10,379,791 0 151,713
Robert E. Greeley 10,379,791 0 151,713
Cornelius J. Pings 10,379,791 0 151,713
PROPOSAL 2 by Fund
TH1 3,397,265 3,024,574 2,980,027 6,646 37,901
TH2 3,839,894 3,627,147 3,568,099 19,710 39,388
TH3 3,964,143 3,879,759 3,813,311 14,323 52,104
PROPOSAL 3 by Fund
TH1 3,397,265 3,024,574 2,978,462 2,730 43,381
TH2 3,839,894 3,627,147 3,570,577 21,835 34,735
TH3 3,964,143 3,879,759 3,815,068 23,422 41,269
PROPOSAL 4 by Trust 11,201,304 10,531,504 10,381,124 40,169 110,211
</TABLE>
* KEY:
Trust = Time Horizon Funds
TH1 = Time Horizon Portfolio 1
TH2 = Time Horizon Portfolio 2
TH3 = Time Horizon Portfolio 3
8
<PAGE> 11
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 continuation of the slow economic expansion
of the U.S. economy, combined with low inflation, has been beneficial primarily
to equities and to a lesser extent bonds. The slow expansion has allowed
companies to offset slightly higher wage increases with productivity gains that
has led to a continuation of improved earnings. In turn, investors have been
encouraged by the continuation of earnings growth and lower long-term interest
rates and have been willing to pay higher prices for stocks in hopes of
receiving larger income and capital appreciation in the future.
Add the increased demand for stocks coming from generations preparing for a
retirement without Social Security, and you have a formula for a very strong
market for U.S. stocks.
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 a slight 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. Throughout most of the year we
allowed the equities to grow with the markets advance. And, since the market
conditions were favorable, we had no reason to adjust the target levels of the
allocations.
We did begin to reduce the equity proportion of the funds late in the year,
which is normal, as we get closer to specific time horizons.
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., financial, technology, healthcare), meaning that the
percentage of stocks from any sector should be roughly equivalent to that of the
Standard & Poor's 500, 600 and 400 Indices. We seek added value by identifying
the most promising companies within each industry of a sector rather than the
best-performing industries or sectors.
Q
GIVE US AN EXAMPLE OF HOW YOU CHOOSE AN INDIVIDUAL COMPANY WITHIN AN
INDUSTRY.
A
Back in October we bought Cisco Systems (.27%, .31% and .48% of total net
assets for Portfolios 1, 2 and 3, respectively) and sold our holding of 3Com.
9
<PAGE> 12
3Com's earnings estimates had been lowered and the outlook for earnings growth
had become more clouded. Cisco Systems on the other hand, which is in the same
industry, was not seeing a slowdown and its earnings expectations were still
very good. Although somewhat more expensive on the value side, the earnings
momentum and certainty of Cisco Systems led us to make the switch.
This exchange of 3Com to Cisco Systems points out our goal of not only staying
neutral in the same industry but also not trying 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. Lower than average spread volatility during this
period enabled our commitment to agencies, corporate, asset-backed securities
and mortgage-backed securities to generate a favorable return.
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:
- ---------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------- ----------- -----------
<S> <C> <C> <C>
Credit quality AAA AAA AA1
Avg. Maturity 3.90 years 4.60 years 5.50 years
Duration 2.80 years 3.30 years 3.70 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 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.
Q
WHAT HAPPENED TO YOUR FOREIGN EQUITY ALLOCATION? HOW DO YOU MANAGE THIS
PORTION OF THE PORTFOLIO TO SEEK "SUPERIOR LONG-TERM RETURNS?"
A
We have maintained the allocations at or very near the 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, Australia and Far East (EAFE) Index posted a gain of 16.02% in the first
half of 1998 and 6.37% in the past twelve months.***
While foreign markets continue to lag those here at home, the economies in
Europe took the lead, driven by signs of economic recovery on the Continent and
continued corporate activity. Although the Pacific markets rallied at the
beginning of 1998, in
10
<PAGE> 13
recent months they faded as the economy in Japan failed to recover and the
secondary effects of the Southeast Asia crisis began to emerge. Major Latin
American stock markets were strong but others were weak as some of the economic
reforms stalled. As a result, the two funds to which we entrust the foreign
equities portion of each Portfolio have a slight underweight in Europe, the
Pacific rather more underweighted, a position in Latin America which is not part
of the index and a small cash reserve.
The foreign equity portion of the portfolios is managed through these funds to
seek individual securities that have relatively good value and good growth
prospects. We expect that fund 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 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 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 Morgan Stanley Capital International (MSCI) Europe, Australia and Far
East (EAFE) Index is an unmanaged index and may not be invested in directly.
11
<PAGE> 14
TIME HORIZON PORTFOLIO 1
GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT LEHMAN
PERIOD BROS.
(FISCAL YEAR AGGREGATE
COVERED) A SHARES B SHARES K SHARES S&P 500 BOND
<S> <C> <C> <C> <C> <C>
9/5/95 10000 10000 10000 10000 10000
9/30/95 10020 10020 10020 10384 10097
12/31/95 10327 10318 10318 11010 10527
3/31/96 10488 10459 10459 11601 10340
6/30/96 10668 10609 10609 12122 10399
9/30/96 10868 10799 10799 12496 10590
12/31/96 11293 11190 11190 13538 10908
3/31/97 11282 11159 11159 13901 10847
6/30/97 12068 11920 11930 16328 11245
9/30/97 12677 12444 12464 17551 11618
12/31/97 12819 12530 12626 18055 11960
3/31/98 13513 13182 13293 20574 12146
6/30/98 13720 13066 13488 21253 12430
</TABLE>
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 maximum applicable contingent deferred sales
charge on B Shares.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------
SINCE INCEPTION
1-YEAR (9/5/95)
<S> <C> <C>
A Shares+ 13.70% 11.86%
B Shares (load)++ 7.14% 9.94%
B Shares (no-
load)++ 12.14% 10.83%
K Shares+++ 13.07% 11.19%
</TABLE>
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
The Time Horizon Portfolio 1 distributed a total Capital Gain Dividend of
$0.352570 per share for the year ended June 30, 1998. Of this total Capital Gain
Dividend amount, the Fund made a 28 percent rate distribution of $0.252738 per
share.
FOR CORPORATE SHAREHOLDERS ONLY (UNAUDITED)
The percentage of total dividends qualifying for the corporate
dividends-received deduction for the fiscal year ending June 30, 1998 is as
follows:
Time Horizon Portfolio 1 13.23%
12
<PAGE> 15
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 maximum
applicable 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 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)
[PIE CHART]
Consumer Staples ................ 9.1%
Health Care ..................... 10.9%
Basics .......................... 5.5%
Energy .......................... 6.4%
Transportation .................. 1.2%
Consumer Cyclicals .............. 14.3%
Finance ......................... 16.8%
Utilities ....................... 10.2%
Technology ...................... 16.5%
Capital Goods ................... 9.1%
<TABLE>
<CAPTION>
--------------------------------------
TOP FIVE EQUITY HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
<S> <C>
--------------------------------------
1. Microsoft
Corporation 0.64%
......................................
2. General Electric
Company 0.63%
......................................
3. Exxon Corporation 0.51%
......................................
4. Bristol Myers Squibb
Company 0.48%
......................................
5. Dell Computer
Corporation 0.43%
--------------------------------------
</TABLE>
FIXED INCOME PORTION
QUALITY BREAKDOWN*
(fixed-income portion of
portfolio only)
[PIE CHART]
Treasury ........................ 37.9%
Agency .......................... 13.3%
A ............................... 18.8%
AA .............................. 8.5%
AAA ............................. 21.5%
<TABLE>
<CAPTION>
--------------------------------------
TOP FIVE FIXED-INCOME HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
<S> <C>
--------------------------------------
1. U.S. Treasury Notes
6.125 9/30/00 4.46%
......................................
2. U.S. Treasury Notes
6.25 8/31/00 2.85%
......................................
3. U.S. Treasury Notes
6.375 5/15/99 2.85%
......................................
4. U.S. Treasury Notes
6.25 2/15/07 2.57%
......................................
5. U.S. Treasury Notes
6.25 2/15/03 2.57%
--------------------------------------
</TABLE>
*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.)
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT LEHMAN
PERIOD BROS.
(FISCAL YEAR AGGREGATE
COVERED) A SHARES B SHARES K SHARES S&P 500 BOND
<S> <C> <C> <C> <C> <C>
9/5/95 10000 10000 10000 10000 10000
9/30/95 10020 10020 10020 10384 10097
12/31/95 10397 10377 10377 11010 10527
3/31/96 10558 10528 10528 11601 10340
6/30/96 10748 10688 10688 12122 10399
9/30/96 10988 10908 10908 12496 10590
12/31/96 11497 11398 11400 13538 10908
3/31/97 11446 11306 11318 13901 10847
6/30/97 12473 12295 12322 16328 11245
9/30/97 13181 12969 13008 17551 11618
12/31/97 13296 12989 13092 18055 11960
3/31/98 14294 13932 14065 20574 12146
6/30/98 14445 13761 14206 21253 12430
</TABLE>
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 maximum applicable contingent deferred sales
charge on B Shares.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------
SINCE INCEPTION
1-YEAR (9/5/95)
<S> <C> <C>
A Shares+ 15.82% 13.92%
B Shares (load)++ 9.36% 11.98%
B Shares (no-load)++ 14.36% 12.84%
K Shares+++ 15.29% 13.25%
</TABLE>
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
The Time Horizon Portfolio 2 distributed a total Capital Gain Dividend of
$0.369030 per share for the year ended June 30, 1998. Of this total Capital Gain
Dividend amount, the Fund made a 28 percent rate distribution of $0.150790 per
share and a 20 percent rate distribution of $0.034444 per share.
FOR CORPORATE SHAREHOLDERS ONLY (UNAUDITED)
The percentage of total dividends qualifying for the corporate
dividends-received deduction for the fiscal year ending June 30, 1998 is as
follows:
Time Horizon Portfolio 2 19.31%
15
<PAGE> 18
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 maximum
applicable 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-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)
[PIE CHART]
Consumer Cyclicals .............. 15.5%
Finance ......................... 16.6%
Utilities ....................... 10.2%
Technology ...................... 16.3%
Capital Goods ................... 9.3%
Consumer Staples ................ 8.3%
Health Care ..................... 11.1%
Basics .......................... 5.4%
Energy .......................... 5.8%
Transportation .................. 1.5%
<TABLE>
<CAPTION>
--------------------------------------
TOP FIVE EQUITY HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
<S> <C>
--------------------------------------
1. Microsoft
Corporation 0.65%
......................................
2. General Electric
Company 0.64%
......................................
3. Exxon Corporation 0.54%
......................................
4. TJX Companies, Inc. 0.52%
......................................
5. Bristol Myers Squibb
Company 0.51%
--------------------------------------
</TABLE>
FIXED INCOME PORTION
QUALITY BREAKDOWN*
(fixed-income portion of
portfolio only)
[PIE CHART]
Treasury ........................ 30.4%
Agency .......................... 19.7%
A ............................... 21.7%
AA .............................. 10.7%
AAA ............................. 17.5%
<TABLE>
<CAPTION>
--------------------------------------
TOP FIVE FIXED-INCOME HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
<S> <C>
--------------------------------------
1. U.S. Treasury Notes
6.25 2/15/03 4.16%
......................................
2. U.S. Treasury Notes
6.50 5/15/05 2.58%
......................................
3. FHLMC 7.00 5/01/04 2.10%
......................................
4. U.S. Treasury Notes
6.25 8/31/00 1.71%
......................................
5. U.S. Treasury Notes
6.50 10/15/06 1.59%
--------------------------------------
</TABLE>
*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.)
<TABLE>
<CAPTION>
MEASUREMENT LEHMAN
PERIOD BROS.
(FISCAL YEAR AGGREGATE
COVERED) A SHARES B SHARES K SHARES S&P 500 BOND
<S> <C> <C> <C> <C> <C>
9/5/95 10000 10000 10000 10000 10000
9/30/95 10030 10030 10030 10384 10097
12/31/95 10436 10438 10438 11010 10527
3/31/96 10696 10668 10668 11601 10340
6/30/96 10946 10898 10898 12122 10399
9/30/96 11206 11138 11138 12496 10590
12/31/96 11847 11742 11742 13538 10908
3/31/97 11806 11682 11692 13901 10847
6/30/97 13203 13040 13071 16328 11245
9/30/97 14131 13923 13963 17551 11618
12/31/97 14261 13946 14078 18055 11960
3/31/98 15655 15282 15442 20574 12146
6/30/98 15839 15132 15593 21253 12430
</TABLE>
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 maximum applicable contingent deferred sales charge on B Shares.
[CAPTION]
<TABLE>
<CAPTION>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------------
SINCE INCEPTION
1-YEAR (9/5/95)
<S> <C> <C>
A Shares+ 19.96% 17.70%
B Shares (load)++ 13.34% 15.81%
B Shares (no-load)++ 18.34% 16.62%
K Shares+++ 19.30% 17.05%
</TABLE>
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
The Time Horizon Portfolio 3 distributed a total Capital Gain Dividend of
$0.549460 per share for the year ended June 30, 1998. Of this total Capital Gain
Dividend amount, the Fund made a 28 percent rate distribution of $0.199311 per
share and a 20 percent rate distribution of $0.038835 per share.
FOR CORPORATE SHAREHOLDERS ONLY (UNAUDITED)
The percentage of total dividends qualifying for the corporate
dividends-received deduction for the fiscal year ending June 30, 1998 is as
follows:
Time Horizon Portfolio 3 25.44%
18
<PAGE> 21
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 maximum
applicable 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-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)
[PIE CHART]
<TABLE>
<S> <C>
Finance ....................... 16.6%
Technology .................... 16.3%
Consumer Cyclicals ............ 15.5%
Health Care ................... 11.1%
Utilities ..................... 10.2%
Capital Goods ................. 9.3%
Consumer Staples .............. 8.3%
Energy ........................ 5.8%
Basics ........................ 5.4%
Transportation ................ 1.5%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
TOP FIVE EQUITY HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
--------------------------------------
<S> <C>
1. Microsoft
Corporation 0.99%
......................................
2. General Electric
Company 0.97%
......................................
3. Exxon Corporation 0.81%
......................................
4. Bristol Myers Squibb
Company 0.77%
......................................
5. Morgan Stanley Dean
Witter Discover &
Co. 0.74%
--------------------------------------
</TABLE>
FIXED INCOME PORTION
QUALITY BREAKDOWN*
(fixed-income portion of
portfolio only)
[PIE CHART]
<TABLE>
<S> <C>
Treasury ...................... 29.0%
A ............................. 23.8%
Agency ........................ 22.0%
AAA ........................... 17.3%
AA ............................ 7.9%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
TOP FIVE FIXED-INCOME HOLDINGS
(AS A PERCENTAGE OF TOTAL PORTFOLIO)
--------------------------------------
<S> <C>
1. U.S. Treasury Notes
6.375 9/30/01 1.84%
......................................
2. FHLMC 7.00 5/01/04 1.33%
......................................
3. FannieMae
5.75 6/15/05 1.32%
......................................
4. U.S. Treasury Notes
6.50 5/15/05 1.25%
......................................
5. FHLMC 6.50 6/01/04 1.23%
--------------------------------------
</TABLE>
*The portfolio's composition is subject to change. Percentages shown are
percentages of portfolio value.
20
<PAGE> 23
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
COMMON STOCK -- 28.4%
AEROSPACE/DEFENSE -- 0.4%
Cordant Technologies, Inc............................... 700 $ 32,287
Goodrich (B.F.) Co...................................... 400 19,850
Sundstrand Corp......................................... 400 22,900
United Technologies Corp................................ 1,200 111,000
-----------
186,037
-----------
AIRLINES -- 0.2%
Airborne Freight Corp................................... 600 20,962
AMR Corp.*.............................................. 400 33,300
UAL Corp.*.............................................. 300 23,400
-----------
77,662
-----------
APPAREL/TEXTILE -- 0.2%
Jones Apparel Group, Inc.*.............................. 1,400 51,188
Tommy Hilfiger Corp.*................................... 600 37,500
-----------
88,688
-----------
AUTOMOTIVE -- 0.6%
Arvin Industries, Inc................................... 700 25,419
Chrysler Corp........................................... 1,000 56,375
Dana Corp............................................... 500 26,750
Ford Motor Co........................................... 2,000 118,000
Lear Corp.*............................................. 400 20,525
-----------
247,069
-----------
BANKS/SAVINGS & LOANS -- 2.7%
AmSouth Bancorporation.................................. 1,350 53,072
Banc One Corp........................................... 1,200 66,975
BankBoston Corp......................................... 1,000 55,625
Chase Manhattan Corp.................................... 1,600 120,800
Citicorp................................................ 400 59,700
City National Corp...................................... 1,000 36,937
First Union Corp........................................ 1,500 87,375
Fleet Financial Group, Inc.............................. 1,100 91,850
Mellon Bank Corp........................................ 1,400 97,475
National City Corp...................................... 500 35,500
NationsBank Corp........................................ 1,618 123,777
Old Kent Financial Corp................................. 840 30,214
Pacific Century Financial Corp.......................... 1,900 45,600
Republic New York Corp.................................. 400 25,150
Southtrust Corp......................................... 1,450 63,075
State Street Corp....................................... 1,100 76,450
Zions Bancorporation.................................... 600 31,875
-----------
1,101,450
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
21
<PAGE> 24
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
BEVERAGES -- 0.8%
Anheuser-Busch Companies, Inc........................... 600 $ 28,312
Coca-Cola Co............................................ 1,700 145,350
Coca-Cola Enterprises, Inc.............................. 600 23,550
Coors, (Adolph) Co., Class B............................ 500 17,000
PepsiCo, Inc............................................ 2,500 102,969
-----------
317,181
-----------
BUILDING RELATED/APPLIANCE -- 0.3%
Centex Corp............................................. 800 30,200
Hon Industries, Inc..................................... 600 20,400
Miller (Herman), Inc.................................... 1,000 24,312
Southdown, Inc.......................................... 500 35,687
-----------
110,599
-----------
CHEMICALS -- 0.8%
Cabot Corp.............................................. 1,000 32,312
Cytec Industries, Inc.*................................. 500 22,125
Dow Chemical Co......................................... 500 48,344
Du Pont, (E.I.) de Nemours & Co......................... 1,300 97,012
Olin Corp............................................... 700 29,181
PPG Industries, Inc..................................... 400 27,825
Praxair, Inc............................................ 1,000 46,812
Solutia, Inc............................................ 1,200 34,425
-----------
338,036
-----------
COMMERCIAL SERVICES -- 0.5%
AccuStaff, Inc.*........................................ 900 28,125
ACNielsen Corp.*........................................ 1,000 25,250
Fluor Corp.............................................. 800 40,800
Jacobs Engineering Group, Inc.*......................... 600 19,275
Omnicom Group........................................... 900 44,887
Robert Half International, Inc.*........................ 600 33,525
-----------
191,862
-----------
COMMUNICATIONS -- 0.8%
American Power Conversion Corp.*........................ 1,200 36,000
Cisco Systems, Inc.*.................................... 1,200 110,475
Lucent Technologies, Inc................................ 1,600 133,100
Tellabs, Inc.*.......................................... 800 57,300
-----------
336,875
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
22
<PAGE> 25
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
COMPUTER HARDWARE -- 1.5%
Dell Computer Corp.*.................................... 1,900 $ 176,344
EMC Corp.*.............................................. 2,500 112,031
Lexmark International Group, Inc.*...................... 800 48,800
SCI Systems, Inc.*...................................... 500 18,813
Solectron Corp.*........................................ 500 21,031
Storage Technology Corp.*............................... 1,000 43,375
Sun Microsystems, Inc.*................................. 1,000 43,437
Symbol Technologies, Inc................................ 750 28,312
Xerox Corp.............................................. 1,100 111,787
-----------
603,930
-----------
COMPUTER SOFTWARE -- 1.7%
BMC Software, Inc.*..................................... 1,600 83,100
Cadence Design Systems, Inc.*........................... 1,500 46,875
Compuware Corp.*........................................ 1,400 71,575
HBO & Co................................................ 4,000 141,000
Microsoft Corp.*........................................ 2,400 260,100
Network Associates, Inc.*............................... 750 35,906
Oracle Corp.*........................................... 1,500 36,844
Parametric Technology Co.*.............................. 900 24,412
-----------
699,812
-----------
COSMETICS & TOILETRIES -- 0.9%
Avon Products, Inc...................................... 1,400 108,500
Dial Corp............................................... 1,500 38,906
Newell Co............................................... 800 39,850
Procter & Gamble Co..................................... 1,100 100,169
Unilever NV, New York................................... 800 63,150
-----------
350,575
-----------
ELECTRIC -- 1.2%
BEC Energy.............................................. 1,200 49,800
CMS Energy Corp......................................... 600 26,400
Conectiv Inc............................................ 1,900 38,950
DQE, Inc................................................ 750 27,000
Edison International.................................... 2,500 73,906
Energy East Corp........................................ 1,100 45,788
FirstEnergy Corp........................................ 1,400 43,050
FPL Group, Inc.......................................... 1,800 113,400
NIPSCO Industries, Inc.................................. 1,500 42,000
Public Service Co. of New Mexico........................ 1,700 38,569
-----------
498,863
-----------
ELECTRICAL EQUIPMENT -- 0.6%
General Electric Co..................................... 2,800 254,800
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
23
<PAGE> 26
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
ENERGY RELATED -- 0.3%
BJ Services Co.*........................................ 600 $ 17,438
EVI Weatherford, Inc.*.................................. 700 25,988
Input/Output, Inc.*..................................... 400 7,125
Schlumberger, Ltd....................................... 700 47,819
Transocean Offshore, Inc................................ 700 31,150
Varco International, Inc.*.............................. 900 17,831
-----------
147,351
-----------
ENTERTAINMENT -- 0.5%
Carnival Corp........................................... 1,600 63,400
King World Productions, Inc.*........................... 900 22,950
Walt Disney Co.......................................... 1,019 107,059
-----------
193,409
-----------
FINANCIAL SERVICES -- 1.0%
Bear Stearns Companies, Inc............................. 1,200 68,250
Edwards (A.G.), Inc..................................... 900 38,419
Lehman Brothers Holdings, Inc........................... 800 62,050
Morgan Stanley Dean Witter Discover & Co................ 1,900 173,612
Travelers Group, Inc.................................... 950 57,594
-----------
399,925
-----------
FOOD & RELATED -- 0.7%
Campbell Soup Co........................................ 1,100 58,437
Dean Foods Co........................................... 400 21,975
Earthgrains Co.......................................... 300 16,762
Interstate Bakeries Corp................................ 900 29,869
Pioneer Hi-Bred International, Inc...................... 900 37,237
Quaker Oats Co.......................................... 1,000 54,937
Ralcorp Holdings, Inc.*................................. 1,200 22,650
SYSCO Corp.............................................. 1,200 30,750
-----------
272,617
-----------
HOSPITAL MANAGEMENT -- 0.4%
Health Management Associates, Inc.*..................... 1,300 43,469
Lincare Holdings, Inc.*................................. 600 25,237
Omnicare, Inc........................................... 400 15,250
United Healthcare Corp.................................. 800 50,800
Wellpoint Health Networks, Inc.*........................ 300 22,200
-----------
156,956
-----------
HOSPITAL SUPPLY -- 0.8%
Abbott Laboratories..................................... 1,600 65,400
Allegiance Corp......................................... 700 35,875
Biomet, Inc............................................. 2,100 69,431
Guidant Corp............................................ 600 42,787
Hillenbrand Industries, Inc............................. 500 30,000
Johnson & Johnson Co.................................... 900 66,375
-----------
309,868
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
24
<PAGE> 27
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
INSURANCE -- 1.1%
Allstate Corp........................................... 900 $ 82,406
AMBAC Financial Group, Inc.............................. 600 35,100
American General Corp................................... 1,000 71,187
Conseco, Inc............................................ 1,400 65,450
Equitable Companies, Inc................................ 1,300 97,419
Old Republic International Corp......................... 1,500 43,969
SunAmerica, Inc......................................... 750 43,078
-----------
438,609
-----------
MACHINERY -- 0.4%
Aeroquip-Vickers, Inc................................... 300 17,512
AGCO Corp............................................... 700 14,394
Case Corp............................................... 500 24,125
Deere & Co.............................................. 700 37,012
Kaydon Corp............................................. 500 17,656
Parker-Hannifin Corp.................................... 500 19,062
Timken Co............................................... 900 27,731
Trinity Industries, Inc................................. 600 24,900
-----------
182,392
-----------
METALS & MINING -- 0.3%
Martin Marietta Materials, Inc.......................... 1,000 45,000
Nucor Corp.............................................. 600 27,600
USX-U.S. Steel Group, Inc............................... 1,700 56,100
-----------
128,700
-----------
MULTI-INDUSTRY -- 0.6%
Crane Co................................................ 600 29,137
Dover Corp.............................................. 1,200 41,100
Honeywell, Inc.......................................... 800 66,850
Tyco International Ltd.................................. 1,500 94,500
-----------
231,587
-----------
OIL (DOMESTIC) -- 0.5%
Ashland, Inc............................................ 500 25,812
Pennzoil Co............................................. 400 20,250
Philips Petroleum Co.................................... 900 43,369
Sun Co., Inc............................................ 600 23,288
USX-Marathon Group...................................... 1,300 44,606
Valero Energy Corp...................................... 800 26,600
-----------
183,925
-----------
OIL (INTERNATIONAL) -- 1.0%
Chevron Corp............................................ 1,100 91,369
Exxon Corp.............................................. 2,900 206,806
Mobil Corp.............................................. 1,500 114,938
-----------
413,113
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
25
<PAGE> 28
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
PAPER & FOREST PRODUCTS -- 0.4%
American Greetings Corp................................. 800 $ 40,750
Fort James Corp......................................... 1,200 53,400
Owens-Illinois, Inc.*................................... 1,400 62,650
Potlatch Corp........................................... 400 16,800
-----------
173,600
-----------
PHARMACEUTICALS -- 2.0%
Biogen, Inc.*........................................... 700 34,300
Bristol Myers Squibb Co................................. 1,700 195,394
Cardinal Health, Inc.................................... 200 18,750
Merck & Co., Inc........................................ 1,100 147,125
Mylan Laboratories, Inc................................. 1,000 30,063
Pfizer, Inc............................................. 1,400 152,163
Schering-Plough Corp.................................... 1,800 164,925
Watson Pharmaceuticals, Inc.*........................... 1,200 56,025
-----------
798,745
-----------
PRINTING & PUBLISHING -- 0.4%
McGraw-Hill Companies, Inc.............................. 500 40,781
New York Times Co., Class A............................. 500 39,625
Viacom, Inc., Class B*.................................. 700 40,775
Washington Post Co., Class B............................ 70 40,320
-----------
161,501
-----------
RESTAURANTS/LODGING -- 0.3%
Applebee's International, Inc........................... 1,000 22,375
Bob Evans Farms, Inc.................................... 700 14,831
Marriott International, Inc., Class A................... 1,000 32,375
Papa John's International, Inc.*........................ 700 27,606
Promus Hotel Corp.*..................................... 547 21,059
-----------
118,246
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
26
<PAGE> 29
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
RETAIL -- 1.6%
Bed, Bath & Beyond, Inc.*............................... 1,200 $ 62,175
Best Buy Co., Inc.*..................................... 1,400 50,575
Gap, Inc................................................ 1,200 73,950
Home Depot, Inc......................................... 1,050 87,216
Lowe's Companies, Inc................................... 2,000 81,125
OfficeMax, Inc.*........................................ 2,200 36,300
Payless ShoeSource, Inc.*............................... 300 22,106
Ross Stores, Inc........................................ 900 38,700
Staples, Inc.*.......................................... 1,700 49,194
TJX Companies, Inc...................................... 5,800 139,925
-----------
641,266
-----------
RETAIL FOOD/DRUG -- 0.2%
Albertson's, Inc........................................ 600 31,088
Hannaford Brothers Co................................... 200 8,800
Safeway, Inc.*.......................................... 1,200 48,825
-----------
88,713
-----------
SEMI-CONDUCTORS/INSTRUMENTATION -- 0.7%
Harris Corp............................................. 1,400 62,563
Intel Corp.............................................. 300 22,238
Linear Technology Corp.................................. 1,300 78,406
Maxim Integrated Products, Inc.*........................ 2,400 76,050
Thomas & Betts Corp..................................... 300 14,775
Xilinx, Inc.*........................................... 400 13,600
-----------
267,632
-----------
TOBACCO -- 0.3%
Philip Morris Companies, Inc............................ 2,500 98,438
Universal Corp.......................................... 300 11,213
-----------
109,651
-----------
TRANSPORTATION -- 0.1%
Burlington Northern Santa Fe Corp....................... 300 29,456
Hunt (J.B.) Transport Services, Inc..................... 800 28,500
-----------
57,956
-----------
UTILITIES - GAS & PIPELINE -- 0.2%
Coastal Corp............................................ 700 48,869
MCN Corp................................................ 800 19,900
NICOR, Inc.............................................. 700 28,088
-----------
96,857
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
27
<PAGE> 30
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
UTILITIES - TELEPHONE -- 1.4%
360 Communications Co................................... 400 $ 12,800
Ameritech Corp.......................................... 1,800 80,775
AT&T Corp............................................... 2,000 114,250
Bell Atlantic Corp...................................... 1,400 63,875
BellSouth Corp.......................................... 1,500 100,688
Century Telephone Enterprises, Inc...................... 900 41,288
Cincinnati Bell, Inc.................................... 500 14,313
Qwest Communications International, Inc.*............... 466 16,252
Southern New England Telecommunications Corp............ 200 13,100
U.S. WEST, Inc.......................................... 1,200 56,400
WorldCom, Inc.*......................................... 1,500 72,656
-----------
586,397
-----------
TOTAL COMMON STOCK (COST $8,437,157)...................... 11,562,455
-----------
INVESTMENT COMPANIES -- 5.0%
T. Rowe Price Foreign Equity Fund....................... 70,100 1,267,408
T. Rowe Price International Equity Fund................. 50,500 770,630
-----------
TOTAL INVESTMENT COMPANIES (COST $1,767,444).............. 2,038,038
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
ASSET BACKED SECURITIES -- 1.7%
CPS Auto Grantor Trust, Series 1997-3, Class A1, 6.10%,
12/15/02.............................................. $ 280,948 281,044
First USA Credit Card Master Trust, Series 1997-6, Class
A, 6.42%, 03/17/05.................................... 400,000 408,414
-----------
TOTAL ASSET BACKED SECURITIES (COST $680,167)............. 689,458
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
28
<PAGE> 31
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 12.3%
Access Financial Mortgage Loan Trust, Series 1997-3,
Class A, 6.565%, 05/18/24............................. $ 175,000 $ 176,039
American Express Master Trust, Series 1998-1, Class A,
5.90%, 04/15/04....................................... 400,000 401,811
Banc One Auto Grantor Trust, Series 1997-B, Class A,
6.29%, 07/20/04....................................... 413,038 414,878
Chase Credit Card Master Trust, Series 1997-2, Class A,
6.30%, 04/15/03....................................... 500,000 507,126
Chase Manhattan Credit Card Master Trust, Series 1996-4,
Class A, 6.73%, 02/15/03.............................. 500,000 503,976
ContiMortgage Home Equity Loan Trust, Series 1998-1,
Class A, 6.28%, 01/15/13.............................. 500,000 503,965
EQCC Home Equity Loan Trust, Series 1997-2, Class A,
6.72%, 02/15/12....................................... 175,000 178,540
First Plus Home Improvement Loan Trust, Series 1996-3,
Class A, 7.60%, 09/20/14.............................. 350,000 368,327
First Plus Home Loan Trust, Series 1997-1, Class A6,
6.95%, 12/10/15....................................... 275,000 280,702
First Plus Home Loan Trust, Series 1998-2, Class A,
6.23%, 06/10/10....................................... 500,000 501,250
Navistar Financial Corp. Owner Trust, Series 1998-1,
Class A, 5.94%, 11/15/04.............................. 389,774 390,444
Premier Auto Trust, Series 1998-2, Class A, 5.77%,
01/06/02.............................................. 375,000 374,452
Sears Credit Acceptance Master Trust, Series 1998-1,
Class A, 5.80%, 08/15/05.............................. 400,000 399,000
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST
$4,978,682)............................................. 5,000,510
-----------
CORPORATE BONDS -- 12.9%
COMPUTERS -- 1.2%
International Business Machines, Inc., 6.375%,
06/15/00.............................................. 500,000 505,000
-----------
FINANCIAL SERVICES -- 8.1%
Bear Stearns Companies, Inc., 6.75%, 05/01/01........... 400,000 408,000
Chrysler Financial Corp., 6.95%, 03/25/02............... 500,000 515,625
General Motors Acceptance Corp., 6.75%, 02/07/02........ 250,000 255,000
Household Finance Corp., 6.875%, 03/01/07............... 250,000 257,500
Household Netherlands BV, 6.125%, 03/01/03.............. 200,000 198,750
International Lease Finance Corp., 6.875%, 05/01/01..... 500,000 510,625
Merrill Lynch & Co., Inc., 6.00%, 01/15/01.............. 350,000 350,438
Morgan Stanley Dean Witter Discover & Co., 8.10%,
06/24/02.............................................. 750,000 802,500
-----------
3,298,438
-----------
MULTI-INDUSTRY -- 1.3%
Honeywell, Inc., 6.75%, 03/15/02........................ 500,000 513,750
-----------
RETAIL - GENERAL MERCHANDISE -- 0.8%
Wal-Mart Stores, Inc., 7.25%, 06/01/13.................. 305,000 336,263
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
29
<PAGE> 32
TIME HORIZON FUNDS -- PORTFOLIO 1
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
UTILITIES - ELECTRIC -- 0.7%
Southern California Edison Note, 6.50%, 06/01/01........ $ 265,000 $ 268,644
-----------
UTILITIES - TELEPHONE -- 0.8%
AT&T Corp., 8.625%, 12/01/31............................ 300,000 333,375
-----------
TOTAL CORPORATE BONDS (COST $5,113,140)................... 5,255,470
-----------
MEDIUM TERM NOTES -- 4.7%
Banc One Corp., 6.375%, 10/01/02........................ 525,000 528,938
Countrywide Home Loan, 7.45%, 09/16/03.................. 200,000 210,000
Norwest Corp., 6.55%, 12/01/06.......................... 175,000 179,813
Sears Roebuck Acceptance Corp., 6.15%, 11/15/05......... 500,000 501,250
Smithkline Beecham Corp., 6.625%, 10/01/01.............. 500,000 511,250
-----------
TOTAL MEDIUM TERM NOTES (COST $1,903,187)................. 1,931,251
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 8.3%
FannieMae, 7.50%, 06/01/03.............................. 268,511 273,126
FannieMae, 7.00%, 06/01/04.............................. 242,782 246,196
FannieMae, 7.00%, 06/01/04.............................. 65,638 66,561
FannieMae, 6.48%, 06/28/04.............................. 750,000 777,795
FannieMae, 5.75%, 06/15/05.............................. 750,000 750,397
FannieMae, 6.50%, 01/01/06.............................. 278,739 277,520
FannieMae, 7.50%, 10/01/11.............................. 536,001 551,076
FannieMae, 5.50%, 12/25/14.............................. 20,462 20,387
Federal Home Loan Mortgage Corp., 8.00%, 01/01/04....... 107,413 109,594
Federal Home Loan Mortgage Corp., 7.00%, 05/01/04....... 289,509 293,942
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$3,307,605)............................................. 3,366,594
-----------
U.S. TREASURY OBLIGATIONS -- 26.6%
U.S. TREASURY BILLS -- 2.2%
U.S. Treasury Bill, 4.62%, 07/30/98..................... 83,000 82,691
U.S. Treasury Bill, 4.73%, 07/30/98..................... 16,000 15,939
U.S. Treasury Bill, 4.75%, 07/30/98..................... 382,000 380,538
U.S. Treasury Bill, 4.76%, 07/30/98..................... 17,000 16,935
U.S. Treasury Bill, 4.77%, 07/30/98..................... 68,000 67,739
U.S. Treasury Bill, 4.78%, 07/30/98..................... 21,000 20,919
U.S. Treasury Bill, 4.80%, 07/30/98..................... 148,000 147,451
U.S. Treasury Bill, 4.89%, 09/03/98..................... 156,000 154,647
-----------
886,859
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
30
<PAGE> 33
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Concluded
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
U.S. TREASURY NOTES -- 24.4%
U.S. Treasury Note, 6.375%, 05/15/99.................... $1,150,000 $ 1,158,061
U.S. Treasury Note, 6.75%, 05/31/99..................... 775,000 783,494
U.S. Treasury Note, 5.875%, 11/15/99.................... 1,000,000 1,004,550
U.S. Treasury Note, 6.25%, 08/31/00..................... 1,142,000 1,158,456
U.S. Treasury Note, 6.125%, 09/30/00.................... 1,790,000 1,812,017
U.S. Treasury Note, 5.25%, 01/31/01..................... 1,000,000 993,530
U.S. Treasury Note, 6.625%, 06/30/01.................... 200,000 205,750
U.S. Treasury Note, 6.25%, 01/31/02..................... 500,000 510,875
U.S. Treasury Note, 6.25%, 02/15/03..................... 1,015,000 1,044,141
U.S. Treasury Note, 6.50%, 10/15/06..................... 200,000 212,202
U.S. Treasury Note, 6.25%, 02/15/07..................... 1,000,000 1,046,750
-----------
9,929,826
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $10,715,700)........ 10,816,685
-----------
TOTAL INVESTMENTS (COST $36,903,082)(A) -- 99.9%.......... 40,660,461
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1%............. 58,151
-----------
NET ASSETS -- 100.0%...................................... $40,718,612
===========
Percentages indicated are based on net assets of $40,718,612.
(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 $2,264. Cost for
federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
Unrealized appreciation................................. $3,924,057
Unrealized depreciation................................. (168,942)
----------
Net unrealized appreciation............................. $3,755,115
==========
* Non-income producing securities.
</TABLE>
- ---------------
See Notes to Financial Statements.
31
<PAGE> 34
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
COMMON STOCK -- 41.4%
AEROSPACE/DEFENSE -- 0.7%
Alliant Techsystems, Inc.*.............................. 500 $ 31,625
Cordant Technologies, Inc. ............................. 1,800 83,025
Goodrich (B.F.) Co. .................................... 500 24,812
Sundstrand Corp. ....................................... 1,000 57,250
United Technologies Corp. .............................. 1,500 138,750
-----------
335,462
-----------
AIRLINES -- 0.2%
Airborne Freight Corp. ................................. 1,400 48,912
AMR Corp.*.............................................. 800 66,600
UAL Corp.*.............................................. 300 23,400
-----------
138,912
-----------
APPAREL/TEXTILE -- 0.3%
Burlington Industries, Inc.*............................ 1,100 15,469
Jones Apparel Group, Inc.*.............................. 3,000 109,688
Tommy Hilfiger Corp.*................................... 800 50,000
-----------
175,157
-----------
AUTOMOTIVE -- 0.8%
Arvin Industries, Inc. ................................. 1,700 61,731
Chrysler Corp. ......................................... 1,200 67,650
Dana Corp. ............................................. 600 32,100
Ford Motor Co. ......................................... 2,900 171,100
Lear Corp.*............................................. 1,000 51,312
Standard Products Co. .................................. 600 16,875
Titan International, Inc. .............................. 1,100 18,700
-----------
419,468
-----------
BANKS/SAVINGS & LOAN -- 3.7%
AmSouth Bancorporation.................................. 2,925 114,989
Astoria Financial Corp. ................................ 500 26,750
Banc One Corp. ......................................... 1,500 83,719
BankBoston Corp. ....................................... 1,400 77,875
Chase Manhattan Corp. .................................. 2,000 151,000
Citicorp................................................ 500 74,625
City National Corp. .................................... 2,400 88,650
Commerce Bancorp, Inc. ................................. 300 17,550
Cullen/Frost Bankers, Inc. ............................. 600 32,550
Downey Financial Corp. ................................. 500 16,344
Fifth Third Bancorp..................................... 402 25,326
First Commercial Corp. ................................. 500 34,719
FirstFed Financial Corp.*............................... 500 26,000
First Union Corp. ...................................... 1,900 110,675
Fleet Financial Group, Inc. ............................ 1,400 116,900
</TABLE>
- ---------------
See Notes to Financial Statements.
32
<PAGE> 35
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
BANKS/SAVINGS & LOAN -- (CONTINUED)
Mellon Bank Corp. ...................................... 1,300 $ 90,512
National City Corp. .................................... 600 42,600
NationsBank Corp. ...................................... 2,187 167,305
Old Kent Financial Corp. ............................... 1,995 71,758
Pacific Century Financial Corp. ........................ 4,600 110,400
Republic New York Corp. ................................ 800 50,350
Southtrust Corp. ....................................... 3,200 139,200
State Street Corp. ..................................... 1,400 97,300
Trustmark Corp. ........................................ 1,100 24,131
Zions Bancorporation.................................... 1,400 74,375
-----------
1,865,603
-----------
BEVERAGES -- 0.9%
Anheuser-Busch Cos., Inc. .............................. 800 37,750
Canandaigua Brands, Inc.*............................... 300 14,756
Coca-Cola Co. .......................................... 2,300 196,650
Coca-Cola Enterprises, Inc. ............................ 1,300 51,025
Coors, (Adolph) Co., Class B............................ 1,200 40,800
PepsiCo, Inc. .......................................... 3,300 135,919
-----------
476,900
-----------
BUILDING RELATED/APPLIANCE -- 0.8%
AptarGroup, Inc. ....................................... 500 31,094
Centex Corp. ........................................... 1,100 41,525
Hon Industries, Inc. ................................... 1,400 47,600
Interface, Inc. ........................................ 1,200 24,225
M.D.C. Holdings, Inc. .................................. 1,200 23,700
Miller (Herman), Inc. .................................. 2,400 58,350
Mohawk Industries, Inc.*................................ 900 28,519
Ryland Group, Inc. ..................................... 1,400 36,750
Southdown, Inc. ........................................ 1,600 114,200
-----------
405,963
-----------
CHEMICALS -- 1.2%
Cabot Corp. ............................................ 2,100 67,856
Cytec Industries, Inc.*................................. 1,300 57,525
Dow Chemical Co. ....................................... 500 48,344
Du Pont, (E.I.) de Nemours & Co. ....................... 1,800 134,325
GenCorp, Inc. .......................................... 800 20,200
Olin Corp. ............................................. 1,600 66,700
PPG Industries, Inc. ................................... 700 48,694
Praxair, Inc. .......................................... 900 42,131
Scotts Co., Class A *................................... 700 26,075
Solutia, Inc. .......................................... 2,800 80,325
-----------
592,175
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
33
<PAGE> 36
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
COMMERCIAL SERVICES -- 0.9%
AccuStaff, Inc.*........................................ 3,000 $ 93,750
ACNielsen Corp.*........................................ 2,300 58,075
Central Parking Corp. .................................. 500 22,750
Fluor Corp. ............................................ 1,000 51,000
Interim Services, Inc.* ................................ 800 25,700
Jacobs Engineering Group, Inc.* ........................ 1,300 41,762
Omnicom Group........................................... 1,800 89,775
Robert Half International, Inc.* ....................... 1,400 78,225
Valassis Communications, Inc.* ......................... 300 11,569
-----------
472,606
-----------
COMMUNICATIONS -- 1.0%
American Power Conversion Corp.* ....................... 2,600 78,000
Cisco Systems, Inc.* ................................... 1,700 156,506
Filenet Corp.* ......................................... 1,000 28,875
Lucent Technologies, Inc. .............................. 2,200 183,013
Tellabs, Inc.* ......................................... 1,000 71,625
-----------
518,019
-----------
COMPUTER HARDWARE -- 1.8%
Dell Computer Corp.* ................................... 2,400 222,750
EMC Corp.* ............................................. 2,400 107,550
Lexmark International Group, Inc.* ..................... 1,900 115,900
SCI Systems, Inc.* ..................................... 1,900 71,488
Solectron Corp.* ....................................... 700 29,444
Storage Technology Corp.* .............................. 2,200 95,425
Sun Microsystems, Inc.* ................................ 800 34,750
Symbol Technologies, Inc. .............................. 1,350 50,962
Tech Data Corp.* ....................................... 500 21,438
Xerox Corp. ............................................ 1,000 101,625
Zebra Technologies Corp., Class A *..................... 600 25,650
-----------
876,982
-----------
COMPUTER SOFTWARE -- 2.7%
BMC Software, Inc.* .................................... 3,600 186,975
Cadence Design Systems, Inc.* .......................... 3,400 106,250
CIBER, Inc.* ........................................... 1,000 38,000
Compuware Corp.* ....................................... 3,200 163,600
HBO & Co. .............................................. 7,000 246,750
Keane, Inc.* ........................................... 700 39,200
Microsoft Corp.* ....................................... 3,000 325,125
Network Associates, Inc.* .............................. 1,650 78,994
Oracle Corp.* .......................................... 1,400 34,387
Parametric Technology Corp.* ........................... 2,200 59,675
Progress Software Corp.* ............................... 500 20,500
Sterling Software, Inc.* ............................... 1,100 32,519
-----------
1,331,975
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
34
<PAGE> 37
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
COSMETICS & TOILETRIES -- 0.9%
Avon Products, Inc. .................................... 1,300 $ 100,750
Dial Corp. ............................................. 3,400 88,187
Newell Co. ............................................. 700 34,869
Procter & Gamble Co. ................................... 1,500 136,594
Unilever NV, New York................................... 1,000 78,937
-----------
439,337
-----------
ELECTRIC -- 2.1%
BEC Energy.............................................. 2,700 112,050
CMS Energy Corp. ....................................... 1,400 61,600
Conectiv, Inc. ......................................... 4,800 98,400
DQE, Inc. .............................................. 1,850 66,600
Edison International.................................... 3,300 97,556
Energy East Corp. ...................................... 2,600 108,225
FirstEnergy Corp. ...................................... 3,700 113,775
FPL Group, Inc. ........................................ 2,500 157,500
NIPSCO Industries, Inc. ................................ 3,400 95,200
Public Service Co. of New Mexico........................ 4,600 104,363
TNP Enterprises, Inc. .................................. 900 27,788
United Illuminating Co. ................................ 300 15,188
-----------
1,058,245
-----------
ELECTRICAL EQUIPMENT -- 0.6%
General Electric Co. ................................... 3,500 318,500
-----------
ENERGY RELATED -- 0.8%
BJ Services Co.* ....................................... 1,400 40,688
Cabot Oil & Gas Corp. .................................. 1,100 22,000
Devon Energy Corp. ..................................... 500 17,469
EVI Weatherford, Inc.* ................................. 1,600 59,400
Input/Output, Inc.* .................................... 1,000 17,812
Newfield Exploration Co.* .............................. 900 22,388
Pool Energy Service Co.* ............................... 900 13,275
Schlumberger, Ltd. ..................................... 900 61,481
Transocean Offshore, Inc. .............................. 1,700 75,650
Tuboscope, Inc.* ....................................... 800 15,800
Varco International, Inc.* ............................. 1,700 33,681
-----------
379,644
-----------
ENTERTAINMENT -- 0.6%
Carmike Cinemas, Inc.* ................................. 500 13,469
Carnival Corp. ......................................... 2,000 79,250
King World Productions, Inc.* .......................... 1,500 38,250
Rio Hotel and Casino, Inc.* ............................ 1,000 18,875
Showbiz Pizza Time, Inc.* .............................. 900 36,281
Walt Disney Co. ........................................ 1,219 128,071
-----------
314,196
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
35
<PAGE> 38
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
FINANCIAL SERVICES -- 1.4%
Bear Stearns Cos., Inc. ................................ 2,800 $ 159,250
Edwards (A.G.), Inc. ................................... 2,300 98,181
First American Financial Corp. ......................... 600 54,000
Legg Mason, Inc. ....................................... 400 23,025
Lehman Brothers Holdings, Inc. ......................... 700 54,294
Morgan Stanley Dean Witter Discover & Co. .............. 2,700 246,712
Travelers Group, Inc. .................................. 1,200 72,750
-----------
708,212
-----------
FOOD & RELATED -- 1.1%
Campbell Soup Co. ...................................... 1,500 79,687
Dean Foods Co. ......................................... 900 49,444
Earthgrains Co. ........................................ 900 50,287
Interstate Bakeries Corp. .............................. 2,900 96,244
Pioneer Hi-Bred International, Inc. .................... 1,200 49,650
Quaker Oats Co. ........................................ 1,400 76,912
Ralcorp Holdings, Inc.*................................. 2,600 49,075
Smithfield Foods, Inc.*................................. 800 24,400
SYSCO Corp. ............................................ 2,200 56,375
-----------
532,074
-----------
HEALTH CARE -- 0.3%
Integrated Health Services, Inc. ....................... 700 26,250
Mariner Health Group, Inc.*............................. 1,300 21,612
Marquette Medical Systems, Inc.*........................ 700 17,959
Safeskin Corp.*......................................... 600 24,675
Universal Health Services, Inc., Class B *.............. 700 40,863
-----------
131,359
-----------
HOSPITAL MANAGEMENT -- 0.7%
Health Management Associates, Inc.*..................... 3,000 100,312
Lincare Holdings, Inc.*................................. 1,800 75,712
Omnicare, Inc. ......................................... 1,100 41,938
United Healthcare Corp. ................................ 1,100 69,850
Wellpoint Health Networks, Inc.*........................ 800 59,200
-----------
347,012
-----------
HOSPITAL SUPPLY -- 1.0%
Abbott Laboratories..................................... 2,200 89,925
Allegiance Corp. ....................................... 1,600 82,000
Biomet, Inc. ........................................... 3,900 128,944
Datascope Corp.*........................................ 600 15,937
Guidant Corp. .......................................... 600 42,787
Hillenbrand Industries, Inc. ........................... 1,100 66,000
Johnson & Johnson Co. .................................. 1,000 73,750
Sybron International Corp.*............................. 900 22,725
-----------
522,068
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
36
<PAGE> 39
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
INSURANCE -- 1.7%
Allstate Corp. ......................................... 1,100 $ 100,719
AMBAC Financial Group, Inc. ............................ 1,400 81,900
American General Corp. ................................. 1,400 99,662
Capital Re Corp. ....................................... 400 28,650
Conesco, Inc. .......................................... 1,900 88,825
Equitable Cos., Inc. ................................... 1,700 127,394
Fidelity National Financial, Inc. ...................... 500 19,906
Fremont General Corp. .................................. 600 32,512
Life Re Corp. .......................................... 300 24,600
Old Republic International Corp. ....................... 3,750 109,922
Orion Capital Corp. .................................... 400 22,350
Selective Insurance Group, Inc. ........................ 800 17,925
SunAmerica, Inc. ....................................... 1,600 91,900
-----------
846,265
-----------
MACHINERY -- 0.9%
Aeroquip-Vickers, Inc. ................................. 800 46,700
AGCO Corp. ............................................. 2,500 51,406
Applied Power, Inc. .................................... 500 17,187
Case Corp. ............................................. 500 24,125
Deere & Co. ............................................ 900 47,587
Graco, Inc. ............................................ 700 24,412
Kaydon Corp. ........................................... 1,900 67,094
Kuhlman Corp. .......................................... 400 15,825
Manitowoc Co., Inc. .................................... 800 32,250
Parker-Hannifin Corp. .................................. 650 24,781
Timken Co. ............................................. 2,200 67,787
Trinity Industries, Inc. ............................... 1,300 53,950
-----------
473,104
-----------
METALS & MINING -- 0.5%
Martin Marietta Materials, Inc. ........................ 2,300 103,500
National Steel Corp. ................................... 1,100 13,063
Nucor Corp. ............................................ 600 27,600
Texas Industries, Inc. ................................. 700 37,100
USX-U.S. Steel Group, Inc. ............................. 1,600 52,800
-----------
234,063
-----------
MULTI-INDUSTRY -- 0.7%
Crane Co. .............................................. 1,400 67,987
Dover Corp. ............................................ 1,700 58,225
Honeywell, Inc. ........................................ 1,000 83,562
Tyco International Ltd. ................................ 2,000 126,000
-----------
335,774
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
37
<PAGE> 40
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
OIL (DOMESTIC) -- 0.6%
Ashland, Inc. .......................................... 1,100 $ 56,788
Pennzoil Co. ........................................... 900 45,563
Philips Petroleum Co. .................................. 1,300 62,644
Sun Co., Inc. .......................................... 800 31,050
USX-Marathon Group...................................... 1,800 61,763
Valero Energy Corp. .................................... 1,700 56,525
-----------
314,333
-----------
OIL (INTERNATIONAL) -- 1.0%
Chevron Corp. .......................................... 1,400 116,288
Exxon Corp. ............................................ 3,800 270,988
Mobil Corp. ............................................ 1,800 137,925
-----------
525,201
-----------
PAPER & FOREST PRODUCTS -- 0.7%
American Greetings Corp. ............................... 1,800 91,687
Fort James Corp. ....................................... 1,700 75,650
Owens-Illinois, Inc.*................................... 2,700 120,825
Potlatch Corp. ......................................... 1,000 42,000
-----------
330,162
-----------
PHARMACEUTICALS -- 2.6%
Alpharma, Inc., Class A................................. 800 17,600
Biogen, Inc.*........................................... 1,300 63,700
Bristol Myers Squibb Co. ............................... 2,200 252,863
Cardinal Health, Inc. .................................. 550 51,563
ICN Pharmaceuticals, Inc. .............................. 400 18,275
Merck & Co., Inc. ...................................... 1,300 173,875
Mylan Laboratories, Inc. ............................... 2,200 66,137
NBTY, Inc.*............................................. 1,200 22,050
Patterson Dental Co.*................................... 400 14,650
Pfizer, Inc. ........................................... 1,800 195,638
Schering-Plough Corp. .................................. 2,600 238,225
Watson Pharmaceuticals, Inc.*........................... 3,500 163,406
-----------
1,277,982
-----------
PRINTING & PUBLISHING -- 0.5%
Gibson Greetings, Inc.*................................. 500 12,500
McGraw-Hill Cos., Inc. ................................. 600 48,938
New York Times Co., Class A............................. 700 55,475
Viacom, Inc., Class B *................................. 900 52,425
Washington Post Co., Class B............................ 80 46,080
World Color Press, Inc.*................................ 700 24,500
-----------
239,918
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
38
<PAGE> 41
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
RESTAURANTS/LODGING -- 0.6%
Applebee's International, Inc. ......................... 2,700 $ 60,413
Bob Evans Farms, Inc. .................................. 1,600 33,900
Marriott International Inc., Class A.................... 1,200 38,850
Papa John's International, Inc.*........................ 1,600 63,100
Promus Hotel Corp.*..................................... 1,210 46,585
Ruby Tuesday, Inc. ..................................... 1,200 18,600
Ryan's Family Steak Houses, Inc.*....................... 1,700 17,425
-----------
278,873
-----------
RETAIL -- 2.4%
Bed, Bath & Beyond, Inc.*............................... 1,500 77,719
Best Buy Co., Inc.*..................................... 2,800 101,150
Dress Barn, Inc.*....................................... 900 22,388
Ethan Allen Interiors, Inc. ............................ 500 24,969
Footstar, Inc.*......................................... 800 38,400
Gap, Inc. .............................................. 1,500 92,438
Guilford Mills, Inc. ................................... 800 16,000
Home Depot, Inc. ....................................... 1,050 87,216
Lowe's Cos., Inc. ...................................... 2,000 81,125
OfficeMax, Inc.*........................................ 4,900 80,850
Payless ShoeSource, Inc.*............................... 800 58,950
Pillowtex Corp. ........................................ 400 16,050
Proffitt's, Inc.*....................................... 600 24,225
Ross Stores, Inc. ...................................... 3,100 133,300
Staples, Inc.*.......................................... 3,500 101,281
TJX Cos., Inc. ......................................... 10,800 260,550
-----------
1,216,611
-----------
RETAIL FOOD/DRUG -- 0.3%
Albertson's, Inc. ...................................... 500 25,906
Hannaford Brothers Co. ................................. 600 26,400
Richfood Holdings, Inc. ................................ 700 14,481
Safeway, Inc.*.......................................... 1,700 69,169
Whole Foods Market, Inc.*............................... 400 24,200
-----------
160,156
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
39
<PAGE> 42
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
SEMI-CONDUCTORS/INSTRUMENTATION -- 1.4%
Anixter International, Inc.*............................ 1,200 $ 22,875
C-Cube Microsystems, Inc.*.............................. 1,100 20,419
Comverse Technology, Inc.*.............................. 300 15,562
Digi International, Inc.*............................... 1,000 20,250
Harmon Industries, Inc. ................................ 500 11,875
Harris Corp. ........................................... 2,300 102,781
Intel Corp. ............................................ 400 29,650
Inter-Tel, Inc. ........................................ 400 6,400
Linear Technology Corp. ................................ 2,500 150,781
Maxim Integrated Products, Inc.*........................ 4,400 139,425
PMC-Sierra, Inc.*....................................... 500 23,438
Sanmina Corp.*.......................................... 600 26,025
Technitrol, Inc. ....................................... 700 27,956
Thomas & Betts Corp. ................................... 800 39,400
Vitesse Semiconductors Corp.*........................... 1,200 37,050
Xilinx, Inc.*........................................... 900 30,600
-----------
704,487
-----------
TOBACCO -- 0.3%
Philip Morris Cos., Inc. ............................... 3,400 133,875
Universal Corp. ........................................ 700 26,163
-----------
160,038
-----------
TRANSPORTATION -- 0.4%
Burlington Northern Santa Fe Corp. ..................... 400 39,275
Hunt (J.B.) Transport Services, Inc. ................... 2,300 81,938
M.S. Carriers, Inc.*.................................... 1,000 27,125
Rollins Truck Leasing Corp. ............................ 2,300 28,463
-----------
176,801
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
40
<PAGE> 43
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
UTILITIES - GAS & PIPELINE -- 0.5%
Coastal Corp. .......................................... 900 $ 62,831
Energen Corp. .......................................... 1,500 30,188
MCN Corp. .............................................. 1,700 42,288
NICOR, Inc. ............................................ 1,600 64,200
Southwest Gas Corp. .................................... 1,100 26,881
-----------
226,388
-----------
UTILITIES - TELEPHONE -- 1.8%
360 Communications Co. ................................. 1,000 32,000
Ameritech Corp. ........................................ 2,400 107,700
AT&T Corp. ............................................. 2,600 148,525
Bell Atlantic Corp. .................................... 1,800 82,125
BellSouth Corp. ........................................ 2,200 147,675
Century Telephone Enterprises, Inc. .................... 1,950 89,456
Cincinnati Bell, Inc. .................................. 1,000 28,625
Qwest Communications International, Inc.*............... 1,049 36,584
Southern New England Telecommunications Corp. .......... 600 39,300
Teleport Communications Group, Inc.*.................... 181 9,819
U.S. West, Inc. ........................................ 1,600 75,200
WorldCom, Inc.*......................................... 2,100 101,719
-----------
898,728
-----------
TOTAL COMMON STOCK (COST $15,981,448)..................... 20,758,753
-----------
INVESTMENT COMPANIES -- 9.0%
T. Rowe Price Foreign Equity Fund....................... 125,900 2,276,272
T. Rowe Price International Equity Fund................. 145,800 2,224,908
-----------
TOTAL INVESTMENT COMPANIES (COST $3,937,067).............. 4,501,180
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
ASSET BACKED SECURITIES -- 1.2%
CPS Auto Grantor Trust, Series 1997-3, Class A1, 6.10%,
12/15/02.............................................. $ 280,948 281,044
First USA Credit Card Master Trust, Series 1997-6, Class
A, 6.42%, 03/17/05.................................... 350,000 357,362
-----------
TOTAL ASSET BACKED SECURITIES (COST $630,262)............. 638,406
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
41
<PAGE> 44
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 7.0%
Access Financial Mortgage Loan Trust, Series 1997-3,
Class A, 6.565%, 05/18/24............................. $ 175,000 $ 176,039
American Express Master Trust, Series 1998-1, Class A,
5.90%, 04/15/04....................................... 300,000 301,358
Banc One Auto Grantor Trust, Series 1997-B, Class A,
6.29%, 07/20/04....................................... 330,430 331,902
Chase Credit Card Master Trust, Series 1997-2, Class A,
6.30%, 04/15/03....................................... 500,000 507,126
Chase Manhattan Credit Card Master Trust, Series 1996-4,
Class A, 6.73%, 02/15/03.............................. 500,000 503,976
EQCC Home Equity Loan Trust, Series 1997-2, Class A,
6.72%, 02/15/12....................................... 175,000 178,540
First Plus Home Improvement Loan Trust, Series 1996-3,
Class A, 7.60%, 09/20/14.............................. 350,000 368,327
First Plus Home Loan Trust, Series 1997-1, Class A6,
6.95%, 12/10/15....................................... 250,000 255,183
Navistar Financial Corp. Owner Trust, Series 1998-1,
Class A, 5.94%, 11/15/04.............................. 292,330 292,833
Premier Auto Trust, Series 1998-2, Class A, 5.77%,
01/06/02.............................................. 325,000 324,525
Sears Credit Account Master Trust, Series 1998-1, Class
A, 5.80%, 08/15/05.................................... 300,000 299,250
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST
$3,518,598)............................................. 3,539,059
-----------
CORPORATE BONDS -- 11.2%
COMPUTERS -- 1.0%
International Business Machines, Inc., 6.375%,
06/15/00.............................................. 500,000 505,000
-----------
FINANCIAL SERVICES -- 7.1%
Bear Stearns Companies, Inc., 6.75%, 05/01/01........... 400,000 408,000
Chrysler Financial Corp., 6.95%, 03/25/02............... 500,000 515,625
General Motors Acceptance Corp., 5.875%, 01/22/03....... 250,000 245,625
General Motors Acceptance Corp., 6.75%, 02/07/02........ 250,000 255,000
Household Finance Corp., 6.875%, 03/01/07............... 250,000 257,500
Household Netherlands Corp., 6.125%, 03/01/03........... 200,000 198,750
International Lease Finance Corp., 6.875%, 05/01/01..... 500,000 510,625
Merrill Lynch & Co., Inc., 6.00%, 01/15/01.............. 350,000 350,438
Morgan Stanley Dean Witter Discover & Co., 8.10%,
06/24/02.............................................. 250,000 267,500
Pitney Bowes Credit Corp., 5.65%, 01/15/03.............. 275,000 270,531
Transamerica Finance Corp., 6.375%, 11/15/01............ 260,000 262,275
-----------
3,541,869
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 45
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
FOOD & RELATED -- 0.7%
Hershey Foods Co., 6.70%, 10/01/05...................... $ 325,000 $ 343,281
-----------
MULTI-INDUSTRY -- 1.0%
Honeywell, Inc., 6.750%, 03/15/02....................... 500,000 513,750
-----------
RETAIL - GENERAL MERCHANDISE -- 0.7%
Wal-Mart Stores, Inc., 7.25%, 06/01/13.................. 300,000 330,750
-----------
UTILITIES - ELECTRIC -- 0.3%
Southern California Edison Note, 6.50%, 06/01/01........ 145,000 146,994
-----------
UTILITIES - TELEPHONE -- 0.4%
AT&T Corp., 8.625%, 12/01/31............................ 200,000 222,250
-----------
TOTAL CORPORATE BONDS (COST $5,479,517)................... 5,603,894
-----------
MEDIUM TERM NOTES -- 4.2%
Banc One Corp., 6.375%, 10/01/02........................ 600,000 604,500
Countrywide Home Loan, 7.45%, 09/16/03.................. 200,000 210,000
Norwest Corp., 6.55%, 12/01/06.......................... 250,000 256,875
Sears Roebuck Acceptance Corp., 6.15%, 11/15/05......... 500,000 501,250
Smithkline Beecham Corp., 6.625%, 10/01/01.............. 500,000 511,250
-----------
TOTAL MEDIUM TERM NOTES (COST $2,053,260)................. 2,083,875
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 9.1%
FannieMae, 7.50%, 06/01/03.............................. 268,511 273,126
FannieMae, 7.00%, 06/01/04.............................. 485,565 492,393
FannieMae, 7.00%, 06/01/04.............................. 303,577 307,846
FannieMae, 6.48%, 06/28/04.............................. 750,000 777,795
FannieMae, 5.75%, 06/15/05.............................. 750,000 750,397
FannieMae, 6.50%, 01/01/06.............................. 278,739 277,520
FannieMae, 7.50%, 10/01/11.............................. 268,001 275,538
FannieMae, 5.50%, 12/25/14.............................. 6,821 6,796
Federal Home Loan Mortgage Corp., 8.00%, 01/01/04....... 107,413 109,594
Federal Home Loan Mortgage Corp., 7.00%, 05/01/04....... 1,033,960 1,049,792
Federal Home Loan Mortgage Corp., 6.50%, 06/01/04....... 232,481 234,733
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$4,482,712)............................................. 4,555,530
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 46
TIME HORIZON FUNDS -- PORTFOLIO 2
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Concluded
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 16.7%
U.S. TREASURY BILLS -- 2.4%
U.S. Treasury Bill, 4.62%, 07/30/98..................... $ 243,000 $ 242,096
U.S. Treasury Bill, 4.74%, 07/30/98..................... 18,000 17,931
U.S. Treasury Bill, 4.75%, 07/30/98..................... 628,000 625,597
U.S. Treasury Bill, 4.76%, 07/30/98..................... 16,000 15,939
U.S. Treasury Bill, 4.77%, 07/30/98..................... 130,000 129,500
U.S. Treasury Bill, 4.78%, 07/30/98..................... 41,000 40,842
U.S. Treasury Bill, 4.89%, 09/03/98..................... 107,000 106,072
-----------
1,177,977
-----------
U.S. TREASURY NOTES -- 14.3%
U.S. Treasury Note, 6.38%, 05/15/99..................... 200,000 201,402
U.S. Treasury Note, 6.75%, 05/31/99..................... 250,000 252,740
U.S. Treasury Note, 6.25%, 08/31/00..................... 842,000 854,133
U.S. Treasury Note, 6.38%, 03/31/01..................... 200,000 204,184
U.S. Treasury Note, 6.25%, 10/31/01..................... 650,000 663,214
U.S. Treasury Note, 6.25%, 01/31/02..................... 500,000 510,875
U.S. Treasury Note, 6.25%, 02/15/03..................... 2,023,000 2,081,080
U.S. Treasury Note, 6.50%, 05/15/05..................... 1,225,000 1,292,743
U.S. Treasury Note, 6.50%, 10/15/06..................... 750,000 795,757
U.S. Treasury Note, 6.25%, 02/15/07..................... 300,000 314,025
-----------
7,170,153
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $8,152,908)......... 8,348,130
-----------
TOTAL INVESTMENTS (COST $44,235,772)(a) -- 99.8%.......... 50,028,827
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%............. 83,281
-----------
NET ASSETS -- 100.0%...................................... $50,112,108
===========
Percentages indicated are based on net assets of
$50,112,108.
(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 $26,343. Cost
for federal income tax purposes differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation................................. $6,200,704
Unrealized depreciation................................. (433,992)
---------
Net unrealized appreciation............................. $5,766,712
=========
* Non-income producing securities.
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 47
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
COMMON STOCK -- 56.7%
AEROSPACE/DEFENSE -- 0.9%
Alliant Techsystems, Inc.*.............................. 900 $ 56,925
Cordant Technologies, Inc. ............................. 2,400 110,700
Goodrich (B.F.) Co...................................... 1,000 49,625
Sundstrand Corp......................................... 1,200 68,700
United Technologies Corp................................ 2,500 231,250
-----------
517,200
-----------
AIRLINES -- 0.4%
Airborne Freight Corp................................... 2,000 69,875
AMR Corp.*.............................................. 1,200 99,900
UAL Corp.*.............................................. 700 54,600
-----------
224,375
-----------
APPAREL/TEXTILE -- 0.5%
Burlington Industries, Inc.*............................ 1,900 26,719
Jones Apparel Group, Inc.*.............................. 4,200 153,563
Tommy Hilfiger Corp.*................................... 1,500 93,750
-----------
274,032
-----------
AUTOMOTIVE -- 1.2%
Arvin Industries, Inc. ................................. 2,200 79,887
Chrysler Corp. ......................................... 2,200 124,025
Dana Corp. ............................................. 1,200 64,200
Ford Motor Co. ......................................... 4,800 283,200
Lear Corp.*............................................. 1,300 66,706
Standard Products Co.................................... 1,100 30,937
Titan International, Inc................................ 2,000 34,000
-----------
682,955
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
45
<PAGE> 48
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
BANKS/SAVINGS & LOAN -- 5.2%
AmSouth Bancorporation.................................. 4,125 $ 162,164
Astoria Financial Corp. ................................ 800 42,800
Banc One Corp. ......................................... 2,600 145,112
BankBoston Corp. ....................................... 2,400 133,500
Chase Manhattan Corp. .................................. 3,600 271,800
Citicorp................................................ 1,000 149,250
City National Corp. .................................... 2,600 96,037
Commerce Bancorp, Inc. ................................. 500 29,250
Cullen/Frost Bankers, Inc. ............................. 1,100 59,675
Downey Financial Corp. ................................. 900 29,419
Fifth Third Bancorp..................................... 704 44,320
First Commercial Corp. ................................. 900 62,494
First Union Corp. ...................................... 3,200 186,400
FirstFed Financial Corp.*............................... 900 46,800
Fleet Financial Group, Inc. ............................ 2,500 208,750
Mellon Bank Corp. ...................................... 2,300 160,137
National City Corp. .................................... 1,000 71,000
NationsBank Corp. ...................................... 3,881 296,896
Old Kent Financial Corp. ............................... 2,520 90,641
Pacific Century Financial Corp. ........................ 5,900 141,600
Republic New York Corp. ................................ 800 50,350
Southtrust Corp. ....................................... 3,600 156,600
State Street Corp. ..................................... 2,500 173,750
Trustmark Corp. ........................................ 1,900 41,681
Zions Bancorporation.................................... 1,900 100,937
-----------
2,951,363
-----------
BEVERAGES -- 1.4%
Anheuser-Busch Companies, Inc. ......................... 1,300 61,344
Canandaigua Brands, Inc.*............................... 500 24,594
Coca-Cola Co. .......................................... 4,100 350,550
Coca-Cola Enterprises, Inc. ............................ 1,800 70,650
Coors, (Adolph) Co., Class B............................ 1,600 54,400
PepsiCo, Inc............................................ 5,500 226,531
-----------
788,069
-----------
BUILDING RELATED/APPLIANCE -- 1.0%
AptarGroup, Inc. ....................................... 800 49,750
Centex Corp. ........................................... 1,900 71,725
Hon Industries, Inc. ................................... 800 27,200
Interface, Inc. ........................................ 2,000 40,375
Miller (Herman), Inc. .................................. 3,200 77,800
Mohawk Industries, Inc.*................................ 1,500 47,531
M.D.C. Holdings, Inc. .................................. 2,100 41,475
Ryland Group, Inc. ..................................... 2,300 60,375
Southdown, Inc. ........................................ 2,100 149,887
-----------
566,118
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
46
<PAGE> 49
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
CHEMICALS -- 1.6%
Cabot Corp. ............................................ 2,800 $ 90,475
Cytec Industries, Inc.*................................. 1,600 70,800
Dow Chemical Co. ....................................... 800 77,350
Du Pont, (E.I.) de Nemours & Co. ....................... 3,200 238,800
GenCorp, Inc. .......................................... 1,400 35,350
Olin Corp. ............................................. 1,800 75,037
PPG Industries, Inc. ................................... 1,100 76,519
Praxair, Inc. .......................................... 1,600 74,900
Scotts Co., Class A*.................................... 1,200 44,700
Solutia, Inc. .......................................... 3,700 106,144
-----------
890,075
-----------
COMMERCIAL SERVICES -- 1.2%
AccuStaff, Inc.*........................................ 4,200 131,250
ACNielsen Corp.*........................................ 3,000 75,750
Central Parking Corp. .................................. 900 40,950
Fluor Corp. ............................................ 1,800 91,800
Interim Services, Inc.*................................. 1,400 44,975
Jacobs Engineering Group, Inc.*......................... 1,200 38,550
Omnicom Group........................................... 2,600 129,675
Robert Half International, Inc.*........................ 1,900 106,162
Valassis Communications, Inc.*.......................... 600 23,138
-----------
682,250
-----------
COMMUNICATIONS -- 1.5%
3Com Corp.*............................................. 25 767
American Power Conversion Corp.*........................ 3,500 105,000
Cisco Systems, Inc.*.................................... 2,950 271,584
Filenet Corp.*.......................................... 1,800 51,975
Lucent Technologies, Inc. .............................. 3,400 282,838
Tellabs, Inc.*.......................................... 1,800 128,925
-----------
841,089
-----------
COMPUTER HARDWARE -- 2.4%
Dell Computer Corp.*.................................... 4,200 389,813
EMC Corp.*.............................................. 4,200 188,212
Lexmark International Group, Inc.*...................... 2,400 146,400
Solectron Corp.*........................................ 1,200 50,475
SCI Systems, Inc.*...................................... 2,300 86,538
Storage Technology Corp.*............................... 3,000 130,125
Sun Microsystems, Inc.*................................. 1,400 60,812
Symbol Technologies, Inc. .............................. 1,950 73,612
Tech Data Corp.*........................................ 800 34,300
Xerox Corp. ............................................ 1,800 182,925
Zebra Technologies Corp., Class A*...................... 1,100 47,025
-----------
1,390,237
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
47
<PAGE> 50
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
COMPUTER SOFTWARE & SERVICES -- 3.5%
BMC Software, Inc.*..................................... 4,800 $ 249,300
Cadence Design Systems, Inc.*........................... 4,700 146,875
CIBER, Inc.*............................................ 1,600 60,800
Compuware Corp.*........................................ 4,300 219,837
HBO & Co. .............................................. 10,400 366,600
Keane, Inc.*............................................ 1,200 67,200
Microsoft Corp.*........................................ 5,200 563,550
Network Associates, Inc.*............................... 2,100 100,537
Oracle Corp.*........................................... 2,500 61,406
Parametric Technology Corp.*............................ 2,400 65,100
Progress Software Corp.*................................ 800 32,800
Sterling Software, Inc.*................................ 1,900 56,169
-----------
1,990,174
-----------
COSMETICS & TOILETRIES -- 1.3%
Avon Products, Inc. .................................... 2,300 178,250
Dial Corp. ............................................. 4,700 121,906
Newell Co. ............................................. 1,200 59,775
Procter & Gamble Co. ................................... 2,600 236,762
Unilever NV, New York................................... 1,700 134,194
-----------
730,887
-----------
ELECTRIC -- 2.6%
BEC Energy.............................................. 3,600 149,400
CMS Energy Corp. ....................................... 1,800 79,200
Conectiv, Inc. ......................................... 6,000 123,000
DQE, Inc. .............................................. 2,250 81,000
Edison International.................................... 5,800 171,462
Energy East Corp. ...................................... 3,300 137,363
FirstEnergy Corp. ...................................... 4,500 138,375
FPL Group, Inc. ........................................ 4,000 252,000
NIPSCO Industries, Inc. ................................ 4,800 134,400
Public Service Co. of New Mexico........................ 5,700 129,319
TNP Enterprises, Inc. .................................. 1,500 46,313
United Illuminating Co. ................................ 600 30,375
-----------
1,472,207
-----------
ELECTRICAL EQUIPMENT -- 1.0%
General Electric Co. ................................... 6,100 555,100
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
48
<PAGE> 51
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
ENERGY RELATED -- 1.0%
BJ Services Co.*........................................ 2,000 $ 58,125
Cabot Oil & Gas Corp. .................................. 1,800 36,000
Devon Energy Corp. ..................................... 900 31,444
EVI Weatherford, Inc.*.................................. 2,000 74,250
Input/Output, Inc.*..................................... 1,100 19,594
Newfield Exploration Co.*............................... 1,500 37,313
Pool Energy Service Co.*................................ 1,500 22,125
Schlumberger, Ltd. ..................................... 1,500 102,469
Transocean Offshore, Inc. .............................. 2,100 93,450
Tuboscope, Inc.*........................................ 1,300 25,675
Varco International, Inc.*.............................. 2,100 41,606
-----------
542,051
-----------
ENTERTAINMENT -- 0.9%
Carmike Cinemas, Inc.*.................................. 900 24,244
Carnival Corp. ......................................... 3,400 134,725
King World Productions, Inc.*........................... 2,200 56,100
Rio Hotel and Casino, Inc.*............................. 1,600 30,200
Showbiz Pizza Time, Inc.*............................... 1,500 60,469
Walt Disney Co. ........................................ 1,919 201,615
-----------
507,353
-----------
FINANCIAL SERVICES -- 1.9%
Bear Stearns Companies, Inc. ........................... 3,200 182,000
Edwards (A.G.), Inc. ................................... 3,000 128,062
First American Financial Corp. ......................... 1,000 90,000
Legg Mason, Inc. ....................................... 600 34,537
Lehman Brothers Holdings, Inc. ......................... 1,200 93,075
Morgan Stanley Dean Witter Discover & Co. .............. 4,600 420,325
Travelers Group, Inc. .................................. 2,150 130,344
-----------
1,078,343
-----------
FOOD & RELATED -- 1.5%
Campbell Soup Co. ...................................... 2,700 143,437
Dean Foods Co. ......................................... 1,200 65,925
Earthgrains Co. ........................................ 1,200 67,050
Interstate Bakeries Corp. .............................. 4,500 149,344
Pioneer Hi-Bred International, Inc. .................... 1,800 74,475
Quaker Oats Co. ........................................ 2,400 131,850
Ralcorp Holdings, Inc.*................................. 3,400 64,175
Smithfield Foods, Inc.*................................. 1,400 42,700
SYSCO Corp. ............................................ 3,900 99,937
-----------
838,893
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
49
<PAGE> 52
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
HEALTHCARE -- 0.4%
Integrated Health Services, Inc. ....................... 1,200 $ 45,000
Mariner Health Group, Inc.*............................. 2,300 38,238
Marquette Medical Systems, Inc.*........................ 1,300 33,353
Safeskin Corp.*......................................... 1,000 41,125
Universal Health Services, Inc., Class B*............... 1,200 70,050
-----------
227,766
-----------
HOSPITAL MANAGEMENT -- 0.7%
Health Management Associates, Inc.*..................... 3,500 117,031
Lincare Holdings, Inc.*................................. 2,200 92,537
Omnicare, Inc. ......................................... 1,000 38,125
United Healthcare Corp. ................................ 1,800 114,300
Wellpoint Health Networks, Inc.*........................ 700 51,800
-----------
413,793
-----------
HOSPITAL SUPPLY -- 1.5%
Abbott Laboratories..................................... 3,600 147,150
Allegiance Corp. ....................................... 2,000 102,500
Biomet, Inc. ........................................... 5,900 195,069
Datascope Corp.*........................................ 1,000 26,562
Guidant Corp. .......................................... 1,100 78,444
Hillenbrand Industries, Inc. ........................... 1,400 84,000
Johnson & Johnson Co. .................................. 2,400 177,000
Sybron International Corp.*............................. 1,500 37,875
-----------
848,600
-----------
INSURANCE -- 2.3%
Allstate Corp. ......................................... 2,100 192,281
AMBAC Financial Group, Inc. ............................ 1,700 99,450
American General Corp. ................................. 2,400 170,850
Capital Re Corp. ....................................... 700 50,137
Conseco, Inc. .......................................... 3,300 154,275
Equitable Companies, Inc. .............................. 2,800 209,825
Fidelity National Financial, Inc. ...................... 900 35,831
Fremont General Corp. .................................. 1,100 59,606
Life Re Corp. .......................................... 400 32,800
Old Republic International Corp. ....................... 4,950 145,097
Orion Capital Corp. .................................... 600 33,525
Selective Insurance Group, Inc. ........................ 1,400 31,369
SunAmerica, Inc. ....................................... 2,000 114,875
-----------
1,329,921
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
50
<PAGE> 53
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
MACHINERY -- 1.3%
Aeroquip-Vickers, Inc. ................................. 1,100 $ 64,212
AGCO Corp. ............................................. 3,400 69,912
Applied Power, Inc. .................................... 900 30,937
Case Corp. ............................................. 900 43,425
Deere & Co. ............................................ 1,500 79,312
Graco, Inc. ............................................ 1,200 41,850
Kaydon Corp. ........................................... 2,600 91,812
Kuhlman Corp. .......................................... 700 27,694
Manitowoc Co., Inc. .................................... 1,200 48,375
Parker-Hannifin Corp. .................................. 1,300 49,562
Timken Co. ............................................. 3,000 92,437
Trinity Industries, Inc. ............................... 1,800 74,700
-----------
714,228
-----------
METALS & MINING -- 0.6%
Martin Marietta Materials, Inc. ........................ 2,900 130,500
National Steel Corp. ................................... 1,800 21,375
Nucor Corp. ............................................ 1,000 46,000
Texas Industries, Inc. ................................. 1,200 63,600
USX-U.S. Steel Group, Inc. ............................. 2,900 95,700
-----------
357,175
-----------
MULTI-INDUSTRY -- 1.0%
Crane Co. .............................................. 1,800 87,412
Dover Corp. ............................................ 3,000 102,750
Honeywell, Inc. ........................................ 1,800 150,412
Tyco International Ltd. ................................ 3,500 220,500
-----------
561,074
-----------
OIL (DOMESTIC) -- 0.8%
Ashland, Inc. .......................................... 1,500 77,438
Pennzoil Co. ........................................... 1,200 60,750
Philips Petroleum Co. .................................. 2,200 106,013
Sun Co., Inc. .......................................... 1,300 50,456
USX-Marathon Group...................................... 3,000 102,938
Valero Energy Corp. .................................... 2,300 76,475
-----------
474,070
-----------
OIL (INTERNATIONAL) -- 1.5%
Chevron Corp. .......................................... 1,600 132,900
Exxon Corp. ............................................ 6,500 463,531
Mobil Corp. ............................................ 3,200 245,200
-----------
841,631
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
51
<PAGE> 54
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
PAPER & FOREST PRODUCTS -- 0.8%
American Greetings Corp. ............................... 2,400 $ 122,250
Fort James Corp. ....................................... 3,000 133,500
Owens-Illinois, Inc.*................................... 3,800 170,050
Potlatch Corp. ......................................... 1,200 50,400
-----------
476,200
-----------
PHARMACEUTICALS -- 3.6%
Alpharma, Inc. Class A.................................. 1,400 30,800
Biogen, Inc.*........................................... 1,800 88,200
Bristol Myers Squibb Co. ............................... 3,800 436,763
Cardinal Health, Inc. .................................. 650 60,938
ICN Pharmaceuticals, Inc. .............................. 700 31,981
Merck & Co., Inc. ...................................... 2,300 307,625
Mylan Laboratories, Inc. ............................... 2,900 87,181
NBTY, Inc.*............................................. 2,000 36,750
Patterson Dental Co.*................................... 700 25,638
Pfizer, Inc. ........................................... 3,000 326,063
Schering-Plough Corp. .................................. 4,500 412,313
Watson Pharmaceuticals, Inc.*........................... 4,700 219,431
-----------
2,063,683
-----------
PRINTING & PUBLISHING -- 0.8%
Gibson Greetings, Inc.*................................. 800 20,000
McGraw-Hill Companies, Inc. ............................ 1,000 81,563
New York Times Co., Class A............................. 1,100 87,175
Viacom, Inc., Class B*.................................. 1,700 99,025
Washington Post Co., Class B............................ 220 126,720
World Color Press, Inc.*................................ 1,200 42,000
-----------
456,483
-----------
RESTAURANTS/LODGING -- 0.7%
Applebee's International, Inc. ......................... 3,600 80,550
Bob Evans Farms, Inc. .................................. 2,000 42,375
Mariott International, Inc., Class A.................... 2,000 64,750
Papa John's International, Inc.*........................ 2,100 82,819
Promus Hotel Corp.*..................................... 1,587 61,099
Ruby Tuesday, Inc. ..................................... 2,000 31,000
Ryan's Family Steak Houses, Inc.*....................... 2,900 29,725
-----------
392,318
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
52
<PAGE> 55
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
RETAIL -- 3.2%
Bed, Bath & Beyond, Inc.*............................... 2,400 $ 124,350
Best Buy Co., Inc.*..................................... 3,800 137,275
Dress Barn, Inc.*....................................... 1,500 37,313
Ethan Allen Interiors, Inc. ............................ 800 39,950
Footstar, Inc.*......................................... 1,400 67,200
Gap, Inc. .............................................. 2,600 160,225
Guilford Mills, Inc. ................................... 1,400 28,000
Home Depot, Inc. ....................................... 1,850 153,666
Lowe's Companies, Inc. ................................. 3,600 146,025
OfficeMax, Inc.*........................................ 6,500 107,250
Payless ShoeSource, Inc.*............................... 1,000 73,688
Pillowtex Corp. ........................................ 600 24,075
Proffitt's, Inc.*....................................... 1,000 40,375
Ross Stores, Inc. ...................................... 4,300 184,900
Staples, Inc.*.......................................... 4,600 133,113
TJX Companies, Inc. .................................... 16,200 390,825
-----------
1,848,230
-----------
RETAIL FOOD/DRUG -- 0.5%
Albertson's, Inc. ...................................... 1,000 51,813
Hannaford Brothers Co. ................................. 800 35,200
Richfood Holdings, Inc. ................................ 1,100 22,756
Safeway, Inc.*.......................................... 3,000 122,063
Whole Foods Market, Inc. ............................... 700 42,350
-----------
274,182
-----------
SEMI-CONDUCTORS/INSTRUMENTATION -- 1.8%
Anixter International, Inc.*............................ 2,100 40,031
C-Cube Microsystems, Inc.*.............................. 1,900 35,269
Comverse Technology, Inc.*.............................. 400 20,750
Digi International, Inc.*............................... 1,700 34,425
Harmon Industries, Inc. ................................ 800 19,000
Harris Corp. ........................................... 3,400 151,938
Intel Corp. ............................................ 700 51,888
Inter-Tel, Inc. ........................................ 800 12,800
Linear Technology Corp. ................................ 3,300 199,031
Maxim Integrated Products, Inc.*........................ 6,300 199,631
PMC-Sierra, Inc.*....................................... 900 42,188
Sanmina Corp.*.......................................... 800 34,700
Technitrol, Inc. ....................................... 1,200 47,925
Thomas & Betts Corp. ................................... 900 44,325
Vitesse Semiconductors Corp.*........................... 2,000 61,750
Xilinx, Inc.*........................................... 1,100 37,400
-----------
1,033,051
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
53
<PAGE> 56
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SECURITY DESCRIPTION SHARES VALUE
-------------------- ------ ------
<S> <C> <C>
TOBACCO -- 0.5%
Philip Morris Companies, Inc. .......................... 6,300 $ 248,063
Universal Corp. ........................................ 1,000 37,375
-----------
285,438
-----------
TRANSPORTATION -- 0.5%
Burlington Northern Santa Fe Corp. ..................... 800 78,550
Hunt (J.B.) Transport Services, Inc. ................... 2,800 99,750
M.S. Carriers, Inc.*.................................... 1,600 43,400
Rollins Truck Leasing Corp.............................. 3,900 48,263
-----------
269,963
-----------
UTILITIES - GAS & PIPELINE -- 0.6%
Coastal Corp............................................ 1,600 111,700
Energen Corp. .......................................... 2,600 52,325
MCN Corp. .............................................. 2,500 62,188
NICOR, Inc. ............................................ 2,200 88,275
Southwest Gas Corp. .................................... 1,900 46,431
-----------
360,919
-----------
UTILITIES - TELEPHONE -- 2.6%
360 Communications Co.*................................. 1,300 41,600
Ameritech Corp. ........................................ 4,200 188,475
AT&T Corp. ............................................. 4,600 262,775
Bell Atlantic Corp. .................................... 3,200 146,000
BellSouth Corp. ........................................ 3,600 241,650
Century Telephone Enterprises, Inc. .................... 2,700 123,863
Cincinnati Bell, Inc. .................................. 1,500 42,938
Qwest Communications International, Inc.*............... 1,282 44,710
Southern New England Telecommunications Corp. .......... 700 45,850
Teleport Communications Group, Inc.*.................... 272 14,756
U.S. West, Inc. ........................................ 2,600 122,200
WorldCom, Inc.*......................................... 3,600 174,375
-----------
1,449,192
-----------
TOTAL COMMON STOCK
(COST $24,951,880)...................................... 32,200,688
-----------
INVESTMENT COMPANIES -- 8.3%
T. Rowe Price Foreign Equity Fund....................... 131,800 2,382,944
T. Rowe Price International Equity Fund................. 152,600 2,328,676
-----------
TOTAL INVESTMENT COMPANIES
(COST $4,151,422)....................................... 4,711,620
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
54
<PAGE> 57
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
ASSET BACKED SECURITIES -- 0.8%
CPS Auto Grantor Trust, Series 1997-3, Class A1, 6.10%,
12/15/02.............................................. $ 224,759 $ 224,835
First USA Credit Card Master Trust, Series 1997-6, Class
A, 6.42%, 03/17/05.................................... 250,000 255,259
-----------
TOTAL ASSET BACKED SECURITIES
(COST $474,269)......................................... 480,094
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.1%
Access Financial Mortgage Loan Trust, Series 1997-3,
Class A, 6.565%, 05/18/24............................. 300,000 301,781
American Express Master Trust, Series 1998-1, Class A,
5.90%, 04/15/04....................................... 275,000 276,245
Banc One Auto Grantor Trust, Series 1997-B, Class A,
6.29%, 07/20/04....................................... 206,519 207,439
Chase Credit Card Master Trust, Series 1997-2, Class A,
6.30%, 04/15/03....................................... 250,000 253,563
Chase Manhattan Credit Card Master Trust, Series 1996-4,
Class A, 6.73%, 02/15/03.............................. 250,000 251,988
EQCC Home Equity Loan Trust, Series 1997-2, Class A,
6.72%, 02/15/12....................................... 300,000 306,069
First Plus Home Improvement Loan Trust, Series 1996-3,
Class A, 7.60%, 09/20/14.............................. 300,000 315,709
First Plus Home Loan Trust, Series 1997-1, Class A6,
6.95%, 12/10/15....................................... 125,000 127,592
Navistar Financial Corp. Owner Trust, Series 1998-A1,
Class A, 5.94%, 11/15/04.............................. 292,330 292,833
Premier Auto Trust, Series 1998-2, Class A, 5.77%,
01/06/02.............................................. 300,000 299,561
Sears Credit Account Master Trust, Series 1998-1, Class
A, 5.80%, 08/15/05.................................... 275,000 274,313
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST
$2,895,583)............................................. 2,907,093
-----------
CORPORATE BONDS -- 7.5%
FINANCIAL SERVICES -- 4.5%
Bear Stearns Companies, Inc., 6.75%, 05/01/01........... 400,000 408,000
Chrysler Financial Corp., 6.95%, 03/25/02............... 500,000 515,625
General Motors Acceptance Corp., 6.75%, 02/07/02........ 500,000 510,000
Household Finance Corp., 6.875%, 03/01/07............... 250,000 257,500
Household Netherlands BV, 6.125%, 03/01/03.............. 100,000 99,375
International Lease Finance Corp., 6.875%, 05/01/01..... 500,000 510,625
Transamerica Finance Corp., 6.375%, 11/15/01............ 260,000 262,275
-----------
2,563,400
-----------
FOOD & RELATED -- 0.6%
Hershey Foods Co., 6.70%, 10/01/05...................... 300,000 316,875
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
55
<PAGE> 58
TIME HORIZON FUNDS -- PORTFOLIO 3
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
MULTI-INDUSTRY -- 0.9%
Honeywell, Inc., 6.75%, 03/15/02........................ $ 500,000 $ 513,750
-----------
UTILITIES - ELECTRIC -- 1.0%
Southern California Edison Note, 6.50%, 06/01/01........ 590,000 598,113
-----------
UTILITIES - TELEPHONE -- 0.5%
AT&T Corp., 8.625%, 12/01/31............................ 250,000 277,813
-----------
TOTAL CORPORATE BONDS (COST $4,176,728)................... 4,269,951
-----------
MEDIUM TERM NOTES -- 3.3%
Banc One Corp., 6.375%, 10/01/02........................ 375,000 377,813
Countrywide Home Loan, 7.45%, 09/16/03.................. 100,000 105,000
Norwest Corp., 6.55%, 12/01/06.......................... 350,000 359,625
Sears Roebuck Acceptance Corp., 6.15%, 11/15/05......... 500,000 501,250
Smithkline Beecham Corp., 6.625%, 10/01/01.............. 500,000 511,250
-----------
TOTAL MEDIUM TERM NOTES (COST $1,822,777)................. 1,854,938
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 7.3%
FannieMae, 7.50%, 06/01/03.............................. 268,511 273,126
FannieMae, 7.00%, 06/01/04.............................. 361,010 366,087
FannieMae, 7.00%, 06/01/04.............................. 485,565 492,393
FannieMae, 6.48%, 06/28/04.............................. 500,000 518,530
FannieMae, 5.75%, 06/15/05.............................. 750,000 750,397
FannieMae, 6.50%, 01/01/06.............................. 106,175 105,711
FannieMae, 7.50%, 10/01/11.............................. 89,334 91,846
FannieMae, 5.50%, 12/25/14.............................. 13,641 13,591
Federal Home Loan Mortgage Corp., 8.00%, 01/01/04....... 53,706 54,797
Federal Home Loan Mortgage Corp., 7.00%, 05/01/04....... 744,451 755,851
Federal Home Loan Mortgage Corp., 6.50%, 06/01/04....... 693,668 700,388
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $4,059,911)....................................... 4,122,717
-----------
U.S. TREASURY OBLIGATIONS -- 11.2%
U.S. TREASURY BILLS -- 1.3%
U.S. Treasury Bill, 4.74%, 07/30/98..................... 21,000 20,920
U.S. Treasury Bill, 4.75%, 07/30/98..................... 163,000 162,376
U.S. Treasury Bill, 4.77%, 07/30/98..................... 103,000 102,604
U.S. Treasury Bill, 4.78%, 07/30/98..................... 111,000 110,573
U.S. Treasury Bill, 4.80%, 07/30/98..................... 245,000 244,091
U.S. Treasury Bill, 4.89%, 09/03/98..................... 134,000 132,837
-----------
773,401
-----------
</TABLE>
- ---------------
See Notes to Financial Statements.
56
<PAGE> 59
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, Concluded
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- --------- ------
<S> <C> <C>
U. S. TREASURY BONDS & NOTES -- 9.9%
U.S. Treasury Bond, 7.50%, 11/15/16..................... $ 150,000 $ 180,006
U.S. Treasury Note, 6.25%, 08/31/00..................... 25,000 25,360
U.S. Treasury Note, 6.125%, 09/30/00.................... 625,000 632,687
U.S. Treasury Note, 6.375%, 09/30/01.................... 1,025,000 1,049,087
U.S. Treasury Note, 6.25%, 01/31/02..................... 500,000 510,875
U.S. Treasury Note, 6.50%, 05/15/05..................... 675,000 712,328
U.S. Treasury Note, 6.875%, 05/15/06.................... 625,000 676,375
U.S. Treasury Note, 6.50%, 10/15/06..................... 575,000 610,081
U.S. Treasury Note, 6.25%, 02/15/07..................... 500,000 523,375
U.S. Treasury Note, 6.625%, 05/15/07.................... 250,000 268,270
U.S. Treasury Note, 6.25%, 08/15/23..................... 400,000 428,348
-----------
5,616,792
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $6,287,380)....................................... 6,390,193
-----------
TOTAL INVESTMENTS (COST $48,819,950)(A) -- 100.2%......... 56,937,294
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2%)........... (140,307)
-----------
NET ASSETS -- 100.0%...................................... $56,796,987
===========
Percentages indicated are based on net assets of $56,796,987.
(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 $6,262. Cost for
federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
Unrealized appreciation................................. $8,739,455
Unrealized depreciation................................. (628,373)
----------
Net unrealized appreciation............................. $8,111,082
==========
* Non-income producing securities.
</TABLE>
- ---------------
See Notes to Financial Statements.
57
<PAGE> 60
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$36,903,082, $44,235,772, and $48,819,950,
respectively).............................. $40,660,461 $50,028,827 $56,937,294
Cash......................................... -- 655 4,021
Interest and dividends receivable............ 292,358 279,596 225,067
Receivable for capital shares sold........... 6,333 7,408 15,600
Receivable for investment securities sold.... 34,303 49,004 98,017
Unamortized organization costs............... 11,065 10,622 10,225
Prepaid expenses............................. 11,569 11,216 10,626
----------- ----------- -----------
Total Assets............................... 41,016,089 50,387,328 57,300,850
----------- ----------- -----------
LIABILITIES:
Dividends payable............................ 29,329 -- --
Payable for investment securities
purchased.................................. 49,268 61,543 98,476
Payable for capital shares redeemed.......... 98,750 82,042 256,083
Management fees payable...................... 18,483 7,844 6,810
Shareholder service fees payable (A, B and K
Shares).................................... 8,329 9,758 11,616
12b-1 fees payable (B and K Shares).......... 18,979 22,471 25,867
Other accrued expenses....................... 74,339 91,562 105,011
----------- ----------- -----------
Total Liabilities.......................... 297,477 275,220 503,863
----------- ----------- -----------
NET ASSETS................................... $40,718,612 $50,112,108 $56,796,987
=========== =========== ===========
Net Assets:
A Shares................................... $9,781,888 $13,210,018 $14,395,669
B Shares................................... 30,856,480 36,511,850 41,868,449
K Shares................................... 80,244 390,240 532,869
----------- ----------- -----------
Total...................................... $40,718,612 $50,112,108 $56,796,987
=========== =========== ===========
Shares Outstanding (no par value, unlimited
shares authorized):
A Shares................................... 784,516 991,623 982,260
B Shares................................... 2,509,414 2,782,844 2,899,830
K Shares................................... 6,504 29,691 36,713
----------- ----------- -----------
Total...................................... 3,300,434 3,804,158 3,918,803
=========== =========== ===========
Net Asset Value:
A Shares -- offering price and redemption
price per share.......................... $ 12.47 $ 13.32 $ 14.66
=========== =========== ===========
B Shares -- offering price................. $ 12.30 $ 13.12 $ 14.44
=========== =========== ===========
K Shares -- offering price and redemption
price per share.......................... $ 12.34 $ 13.14 $ 14.51
=========== =========== ===========
COMPOSITION OF NET ASSETS:
Paid in Capital.............................. $34,406,626 $40,616,899 $43,305,057
Accumulated undistributed net investment
income..................................... 572,520 613,102 377,537
Accumulated net realized gains on investment
transactions............................... 1,982,087 3,089,052 4,997,049
Net unrealized appreciation of investments... 3,757,379 5,793,055 8,117,344
----------- ----------- -----------
NET ASSETS, JUNE 30, 1998.................... $40,718,612 $50,112,108 $56,796,987
=========== =========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
58
<PAGE> 61
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Operations
For the year ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1 PORTFOLIO 2 PORTFOLIO 3
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................ $1,657,617 $1,541,245 $1,173,766
Dividends............................... 228,993 413,023 556,407
---------- ---------- ----------
Total Income.......................... 1,886,610 1,954,268 1,730,173
---------- ---------- ----------
EXPENSES:
Management fees......................... 244,463 287,990 321,440
Shareholder service fees (A Shares)..... 23,293 30,202 32,450
Shareholder service fees (B Shares)..... 78,458 88,820 100,667
Shareholder service fees (K Shares)..... 108 553 850
12b-1 fees (B Shares)................... 235,373 267,390 301,915
12b-1 fees (K Shares)................... 216 1,124 1,690
Transfer agent fees..................... 59,838 94,416 117,575
Accounting fees......................... 29,985 29,985 29,985
Custodian fees.......................... 26,775 29,492 37,851
Legal fees.............................. 27,580 31,658 29,983
Audit fees.............................. 14,087 16,282 19,017
Trustees' fees and expenses............. 17,634 21,549 24,155
Registration and filing fees............ 26,398 30,065 28,695
Reports to shareholders................. 29,650 37,082 51,606
Organization costs...................... 5,110 5,110 4,380
Other expenses.......................... 17,670 19,806 26,607
---------- ---------- ----------
Total Expenses........................ 836,638 991,524 1,128,866
Less: Fee waivers....................... (112,813) (148,826) (185,237)
---------- ---------- ----------
Total Net Expenses.................... 723,825 842,698 943,629
---------- ---------- ----------
NET INVESTMENT INCOME..................... 1,162,785 1,111,570 786,544
NET REALIZED/UNREALIZED GAIN ON
INVESTMENTS:
Net realized gains on investment
transactions........................ 2,721,056 3,810,224 6,000,121
Net change in unrealized appreciation
on investments...................... 909,002 1,632,270 2,313,634
---------- ---------- ----------
Net realized/unrealized gains on
investments............................. 3,630,058 5,442,494 8,313,755
---------- ---------- ----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.............................. $4,792,843 $6,554,064 $9,100,299
========== ========== ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
59
<PAGE> 62
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 1
-------------------------
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1998 1997
---------- ----------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................ $ 1,162,785 $ 1,023,828
Net realized gains on investment transactions........ 2,721,056 435,557
Net change in unrealized appreciation of
investments........................................ 909,002 2,656,028
----------- -----------
Change in net assets resulting from operations......... 4,792,843 4,115,413
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
A Shares........................................... (303,557) (235,826)
B Shares........................................... (808,548) (585,618)
K Shares........................................... (1,368) (27)(a)
Net realized gains from investment transactions
A Shares........................................... (264,716) (32,408)
B Shares........................................... (901,438) (90,844)
K Shares........................................... (1,231) (4)(a)
----------- -----------
Change in net assets from shareholder distributions.... (2,280,858) (944,727)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued.......................... 2,553,697 17,998,235
Dividends reinvested................................. 2,229,620 891,487
Cost of shares redeemed.............................. (6,585,495) (7,904,517)
----------- -----------
Change in net assets from capital share transactions... (1,802,178) 10,985,205
----------- -----------
Change in net assets................................... 709,807 14,155,891
NET ASSETS:
Beginning of Year.................................... 40,008,805 25,852,914
----------- -----------
End of Year.......................................... $40,718,612 $40,008,805
=========== ===========
Accumulated Undistributed Net Investment Income........ $ 572,520 $ 532,155
=========== ===========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to June 30, 1997.
See Notes to Financial Statements.
60
<PAGE> 63
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 2 PORTFOLIO 3
------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 1,111,570 $ 928,158 $ 786,544 $ 625,774
3,810,224 526,465 6,000,121 890,937
1,632,270 4,001,664 2,313,634 5,494,585
----------- ----------- ----------- -----------
6,554,064 5,456,287 9,100,299 7,011,296
----------- ----------- ----------- -----------
(275,944) (229,351) (203,802) (151,395)
(594,168) (522,814) (392,613) (377,979)
(4,907) (821)(a) (6,418) (17)(a)
(369,476) (698) (520,616) (700)
(1,095,471) (2,013) (1,612,825) (2,349)
(6,473) (3)(a) (17,485) --
----------- ----------- ----------- -----------
(2,346,439) (755,700) (2,753,759) (532,440)
----------- ----------- ----------- -----------
5,081,360 19,815,954 6,577,283 23,714,685
2,326,331 744,721 2,732,255 527,344
(6,466,563) (6,036,471) (7,223,088) (4,831,133)
----------- ----------- ----------- -----------
941,128 14,524,204 2,086,450 19,410,896
----------- ----------- ----------- -----------
5,148,753 19,224,791 8,432,990 25,889,752
44,963,355 25,738,564 48,363,997 22,474,245
----------- ----------- ----------- -----------
$50,112,108 $44,963,355 $56,796,987 $48,363,997
=========== =========== =========== ===========
$ 613,102 $ 455,883 $ 377,537 $ 293,304
=========== =========== =========== ===========
</TABLE>
61
<PAGE> 64
TIME HORIZON FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
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, 1998, 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 sixth 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 Fund or a Pacific Horizon Fund with
no sales charges or redemption fees as described in the Funds' prospectus.
The Funds' investment objective is to provide investors a 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 Bank-America Corporation, serves as the Funds' Manager,
providing investment advisory and administrative services.
62
<PAGE> 65
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1998
- --------------------------------------------------------------------------------
Effective September 15, 1997, Bank of America entered into an agreement with
PFPC, Inc. ("PFPC"), an indirect wholly-owned subsidiary of PNC Bank Corp.,
pursuant to which PFPC has agreed to provide certain sub-administration services
to the Funds, including, but not limited to, assisting in the developing and
monitoring of compliance procedures, participating in periodic updating of the
Funds' prospectuses and statements of additional information, providing periodic
reports to the Company's Board and providing certain record-keeping services.
Bank of America will bear all fees and expenses charged by PFPC for such
services. BISYS Fund Services Ohio, Inc. ("BISYS"), a wholly owned subsidiary of
The BISYS Group, Inc., served as the Funds' sub-administrator through September
15, 1997.
Furthermore, pursuant to authority granted in the Management Agreement, Bank
of America has entered into an agreement with PFPC under which PFPC has agreed
to provide certain accounting, bookkeeping, pricing and dividend and
distribution calculation services for the Funds. The Funds bear all fees and
expenses charged by PFPC for these services. BISYS served as fund accountant for
the Funds prior to September 15, 1997.
Distributor and Transfer Agent
Effective September 15, 1997, Provident Distributors, Inc. ("PDI"), assumed
responsibility as principal underwriter and distributor of shares of the Funds.
Prior to such date, Concord Financial Group, Inc. (the "Former Distributor")
also a wholly-owned subsidiary of The BISYS Group, Inc., served as distributor
of the Funds. Additionally on October 24, 1997, PFPC assumed responsibility as
the Funds' transfer agent and dividend disbursing agent. BISYS served the Funds
in such capacity prior to such date.
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.
63
<PAGE> 66
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1998
- --------------------------------------------------------------------------------
PORTFOLIO VALUATIONS:
The Funds value portfolio securities (other than debt securities with
remaining maturities of 60 days or less) at 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 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/EXPENSES:
The Funds record security transactions on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recognized on the ex-dividend date. Realized gains and
losses from security transactions are recorded on an identified cost basis.
The 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
64
<PAGE> 67
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1998
- --------------------------------------------------------------------------------
number of said shares being redeemed bears to the number 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 that exceed net investment income
and net realized capital gains for financial reporting purposes, but not for tax
purposes, are reported as distributions 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, 1998, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-in
capital:
<TABLE>
<CAPTION>
ACCUMULATED
ACCUMULATED NET REALIZED
UNDISTRIBUTED GAIN/
NET INVESTMENT (LOSS) ON
INCOME/(LOSS) INVESTMENTS
-------------- --------------
<S> <C> <C>
Portfolio 1... $ (8,947) $ 8,947
Portfolio 2... (79,332) 79,332
Portfolio 3... (99,478) 99,478
</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 all
of its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
65
<PAGE> 68
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1998
- --------------------------------------------------------------------------------
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, Bank
of America is entitled to receive fees from the Funds, which are accrued daily
and payable monthly, at an annual rate of 0.60% of the Funds' average daily net
assets. Pursuant to the terms of its sub-administration agreement with PFPC,
Bank of America will bear all fees and expenses charged by PFPC for such
services.
Pursuant to the authority granted in its Management Agreement, Bank of
America entered into a Sub-Administration Agreement with PFPC beginning
September 15, 1997, under which PFPC will perform certain services of the
Management Agreement. Prior to September 15, 1997, BISYS served as the Funds'
sub-administrator.
The Company has adopted a Shareholder Service Plan for A Shares, B Shares,
and K Shares, under which the Funds reimburse PDI and the Former 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, 1998, the Funds were advised that PDI and the Former Distributor each
retained respectively, $6,826 and $801, for Portfolio 1, $3,785 and $697, for
Portfolio 2, and $2,394 and $259, for Portfolio 3, pursuant to the Shareholder
Services Plan. 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.................. $ 94,034
Portfolio 2.................. $114,853
Portfolio 3.................. $130,341
</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 PDI and
the Former 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
66
<PAGE> 69
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1998
- --------------------------------------------------------------------------------
attributable to the B Shares. For the year ended June 30, 1998, the Funds were
advised that PDI and the Former Distributor each retained respectively, $992 and
$28, for Portfolio 1, $1,006 and $29 for Portfolio 2, and $2,923 and $30, 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................. $234,326
Portfolio 2................. $266,297
Portfolio 3................. $298,645
</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, 1998, Bank of America and its affiliates earned the following
amounts pursuant to the Distribution and Administrative Services Plan:
<TABLE>
<CAPTION>
BANK OF
AMERICA
AND
FUND AFFILIATES
---- ----------
<S> <C>
Portfolio 1.................. $ 3
Portfolio 2.................. $ 2
Portfolio 3.................. $136
</TABLE>
In its capacity as transfer agent and dividend disbursing agent, PFPC earned
$38,167, $66,420 and $85,501 from Portfolio 1, Portfolio 2 and Portfolio 3,
respectively, for the period October 24, 1997 through June 30, 1998. BISYS
earned $21,671, $27,996 and $32,074 from Portfolio 1, Portfolio 2 and Portfolio
3, respectively, for the period July 1, 1997 through October 24, 1997, in its
capacity as transfer agent and dividend disbursing agent.
For the year ended June 30, 1998, Portfolio 1, Portfolio 2 and Portfolio 3
incurred legal charges totaling $27,580, $31,658 and $29,983, respectively,
which were earned by a law firm, a partner of which serves as Secretary of the
Company.
67
<PAGE> 70
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1998
- --------------------------------------------------------------------------------
Certain officers of the Company are affiliated with PFPC. 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, 1998:
<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........................................... $112,813 $148,826 $185,237
12b-1 FEES:
(Percentage of average net assets) (Class B).... .75% .75% .75%
(Percentage of average net assets) (Class K).... .50% .50% .50%
SHAREHOLDER SERVICES FEES:
(Percentage of average net assets).............. .25% .25% .25%
</TABLE>
NOTE 4 -- SECURITIES TRANSACTIONS
For the year ended June 30, 1998, 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.......... $24,123,361 $(27,352,383)
Portfolio 2.......... 28,046,593 (28,348,144)
Portfolio 3.......... 37,452,472 (36,617,298)
</TABLE>
68
<PAGE> 71
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1998
- --------------------------------------------------------------------------------
NOTE 5 -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Funds are summarized below:
<TABLE>
<CAPTION>
PORTFOLIO 1
------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 June 30, 1997 (a)
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
A SHARES
Issued................................. 178,234 $ 2,161,381 351,439 $ 3,894,793
Reinvested............................. 47,410 557,590 21,332 233,491
Redeemed............................... (159,445) (1,931,984) (328,152) (3,636,722)
-------- ----------- --------- -----------
Net increase............................. 66,199 $ 786,987 44,619 $ 491,562
======== =========== ========= ===========
B SHARES
Issued................................. 26,399 $ 316,178 1,289,853 $14,087,875
Reinvested............................. 143,220 1,669,504 60,332 657,965
Redeemed............................... (385,990) (4,636,263) (386,299) (4,267,795)
-------- ----------- --------- -----------
Net increase/(decrease).................. (216,371) $(2,650,581) 963,886 $10,478,045
======== =========== ========= ===========
K SHARES
Issued................................. 6,298 $ 76,138 1,409 $ 15,567
Reinvested............................. 216 2,526 -- 31
Redeemed............................... (1,419) (17,248) -- --
-------- ----------- --------- -----------
Net increase............................. 5,095 $ 61,416 1,409 $ 15,598
======== =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO 2
------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997 (A)
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
A SHARES
Issued................................. 263,191 $ 3,383,297 423,922 $ 4,755,003
Reinvested............................. 52,081 642,355 20,495 229,548
Redeemed............................... (220,809) (2,835,277) (235,847) (2,664,989)
-------- ----------- --------- -----------
Net increase............................. 94,463 $ 1,190,375 208,570 $ 2,319,562
======== =========== ========= ===========
B SHARES
Issued................................. 109,062 $ 1,375,387 1,353,946 $14,965,674
Reinvested............................. 137,055 1,672,654 46,045 514,332
Redeemed............................... (280,953) (3,568,688) (299,787) (3,368,544)
-------- ----------- --------- -----------
Net increase/(decrease).................. (34,836) $ (520,647) 1,100,204 $12,111,462
======== =========== ========= ===========
K SHARES
Issued................................. 25,378 $ 322,676 8,455 $ 95,277
Reinvested............................. 929 11,322 76 841
Redeemed............................... (4,896) (62,598) (250) (2,938)
-------- ----------- --------- -----------
Net increase............................. 21,411 $ 271,400 8,281 $ 93,180
======== =========== ========= ===========
</TABLE>
69
<PAGE> 72
- --------------------------------------------------------------------------------
Notes to Financial Statements, Continued
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO 3
------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 June 30, 1997 (a)
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
A SHARES
Issued................................. 300,357 $ 4,160,776 364,629 $ 4,244,089
Reinvested............................. 54,334 716,448 13,014 151,218
Redeemed............................... (181,734) (2,531,077) (119,893) (1,406,913)
-------- ----------- --------- -----------
Net increase............................. 172,957 $ 2,346,147 257,750 $ 2,988,394
======== =========== ========= ===========
B SHARES
Issued................................. 137,951 $ 1,908,252 1,693,393 $19,375,895
Reinvested............................. 152,727 1,991,952 32,481 376,109
Redeemed............................... (329,148) (4,561,204) (296,365) (3,416,469)
-------- ----------- --------- -----------
Net increase/(decrease).................. (38,470) $ (661,000) 1,429,509 $16,335,535
======== =========== ========= ===========
K SHARES
Issued................................. 37,081 $ 508,255 7,916 $ 94,701
Reinvested............................. 1,823 23,855 1 17
Redeemed............................... (9,479) (130,807) (630) (7,751)
-------- ----------- --------- -----------
Net increase............................. 29,425 $ 401,303 7,287 $ 86,967
======== =========== ========= ===========
</TABLE>
- ---------------
(a) Period from July 22, 1996 (inception date) to June 30, 1997, for the K
Shares.
70
<PAGE> 73
TIME HORIZON PORTFOLIO 1
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997 June 30, 1996(a)
------------- ------------- ----------------
<S> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR...................................... $11.67 $10.65 $10.04(d)
------ ------ ------
Income from Investment Operations:
Net investment income..................... 0.39 0.38 0.22
Net realized and unrealized gains on
investments transactions................ 1.15 0.99 0.45
------ ------ ------
Total income from investment operations..... 1.54 1.37 0.67
------ ------ ------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income....................... (0.39) (0.31) (0.06)
Distributions to shareholders from net
realized gains on investment
transactions............................ (0.35) (0.04) --
------ ------ ------
Total Dividends and Distributions........... (0.74) (0.35) (0.06)
------ ------ ------
Net change in net asset value per share..... 0.80 1.02 0.61
------ ------ ------
NET ASSET VALUE PER SHARE, END OF YEAR...... $12.47 $11.67 $10.65
====== ====== ======
Total return................................ 13.70% 13.13% 6.68%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)........... $9,782 $8,384 $7,172
Ratio of expenses to average net assets... 1.20% 0.99% 0.49%(c)
Ratio of net investment income to average
net assets.............................. 3.43% 3.62% 3.96%(c)
Ratio of expenses to average net
assets*................................. 1.47% 1.67% 2.95%(c)
Ratio of net investment income to average
net assets*............................. 3.16% 2.94% 1.50%(c)
Portfolio turnover rate**................. 61% 73% 72%
</TABLE>
- ---------------
* During the year, 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 among 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 year from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to the public).
See Notes to Financial Statements.
71
<PAGE> 74
TIME HORIZON PORTFOLIO 1
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
JUNE 30, 1997 JUNE 30, 1997 June 30, 1996(a)
------------- ------------- ----------------
<S> <C> <C> <C>
B SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR....................................... $ 11.60 $ 10.60 $ 10.04(d)
------- ------- -------
Income from Investment Operations:
Net investment income...................... 0.33 0.26 0.18
Net realized and unrealized gains on
investments transactions................. 1.03 1.03 0.43
------- ------- -------
Total income from investment operations...... 1.36 1.29 0.61
------- ------- -------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income........................ (0.31) (0.25) (0.05)
Distributions to shareholders from net
realized gains on investment
transactions............................. (0.35) (0.04) --
------- ------- -------
Total Dividends and Distributions............ (0.66) (0.29) (0.05)
------- ------- -------
Net change in net asset value per share...... 0.70 1.00 0.56
------- ------- -------
NET ASSET VALUE PER SHARE, END OF YEAR....... $ 12.30 $ 11.60 $ 10.60
======= ======= =======
Total return (excludes sales charge)......... 12.14% 12.36% 6.09%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)............ $30,857 $31,609 $18,681
Ratio of expenses to average net assets.... 1.95% 1.77% 1.29%(c)
Ratio of net investment income to average
net assets............................... 2.68% 2.85% 3.16%(c)
Ratio of expenses to average net assets*... 2.23% 2.43% 3.65%(c)
Ratio of net investment income to average
net assets*.............................. 2.40% 2.19% 0.80%(c)
Portfolio turnover rate**.................. 61% 73% 72%
</TABLE>
- ---------------
* During the year, 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 among 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 year from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to the public).
See Notes to Financial Statements.
72
<PAGE> 75
TIME HORIZON PORTFOLIO 1
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED ENDED
JUNE 30, 1998 June 30, 1997(a)
------------- ----------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR............ $11.61 $10.41
------ ------
Income from Investment Operations:
Net investment income................................. 0.30 0.36
Net realized and unrealized gains on investments
transactions........................................ 1.16 1.16
------ ------
Total income from investment operations................. 1.46 1.52
------ ------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income.............................................. (0.38) (0.28)
Distributions to shareholders from net realized gains
on investment transactions.......................... (0.35) (0.04)
------ ------
Total Dividends and Distributions....................... (0.73) (0.32)
------ ------
Net change in net asset value per share................. 0.73 1.20
------ ------
NET ASSET VALUE PER SHARE, END OF YEAR.................. $12.34 $11.61
====== ======
Total return............................................ 13.07% 14.78%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)....................... $ 80 $ 16
Ratio of expenses to average net assets............... 1.70% 1.60%(c)
Ratio of net investment income to average net
assets.............................................. 2.96% 2.98%(c)
Ratio of expenses to average net assets*.............. 1.95% 2.19%(c)
Ratio of net investment income to average net
assets*............................................. 2.71% 2.39%(c)
Portfolio turnover rate**............................. 61% 73%
</TABLE>
- ---------------
* During the year, 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 among the classes of shares issued.
(a) Period from July 22,1996 (inception date) to June 30, 1997.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
73
<PAGE> 76
TIME HORIZON PORTFOLIO 2
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997 June 30, 1996(a)
------------- ------------- ----------------
<S> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR...................................... $ 12.15 $ 10.73 $10.04(d)
------- ------- ------
Income from Investment Operations:
Net investment income..................... 0.37 0.31 0.21
Net realized and unrealized gains on
investments transactions................ 1.49 1.39 0.54
------- ------- ------
Total income from investment operations..... 1.86 1.70 0.75
------- ------- ------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income....................... (0.32) (0.28) (0.06)
Distributions to shareholders from net
realized gains on investment
transactions............................ (0.37) -- --
------- ------- ------
Total Dividends and Distributions........... (0.69) (0.28) (0.06)
------- ------- ------
Net change in net asset value per share..... 1.17 1.42 0.69
------- ------- ------
NET ASSET VALUE PER SHARE, END OF YEAR...... $ 13.32 $ 12.15 $10.73
======= ======= ======
Total return................................ 15.82% 16.05% 7.48%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)........... $13,210 $10,899 $7,389
Ratio of expenses to average net assets... 1.20% 0.99% 0.50%(c)
Ratio of net investment income to average
net assets.............................. 2.88% 3.14% 3.72%(c)
Ratio of expenses to average net
assets*................................. 1.51% 1.63% 3.12%(c)
Ratio of net investment income to average
net assets*............................. 2.57% 2.50% 1.10%(c)
Portfolio turnover rate**................. 60% 78% 72%
</TABLE>
- ---------------
* During the year, 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 among 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 year from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to the public).
See Notes to Financial Statements.
74
<PAGE> 77
TIME HORIZON PORTFOLIO 2
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997 June 30, 1996(a)
------------- ------------- ----------------
<S> <C> <C> <C>
B SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR..................................... $ 12.05 $ 10.68 $ 10.04(d)
------- ------- -------
Income from Investment Operations:
Net investment income.................... 0.30 0.22 0.15
Net realized and unrealized gains on
investments transactions............... 1.38 1.37 0.54
------- ------- -------
Total income from investment operations.... 1.68 1.59 0.69
------- ------- -------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income...................... (0.24) (0.22) (0.05)
Distributions to shareholders from net
realized gains on investment
transactions........................... (0.37) -- --
------- ------- -------
Total Dividends and Distributions.......... (0.61) (0.22) (0.05)
------- ------- -------
Net change in net asset value per share.... 1.07 1.37 0.64
------- ------- -------
NET ASSET VALUE PER SHARE, END OF YEAR..... $ 13.12 $ 12.05 $ 10.68
======= ======= =======
Total return (excludes sales charge)....... 14.36% 15.04% 6.88%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000).......... $36,512 $33,965 $18,350
Ratio of expenses to average net
assets................................. 1.95% 1.77% 1.32%(c)
Ratio of net investment income to average
net assets............................. 2.12% 2.37% 2.92%(c)
Ratio of expenses to average net
assets*................................ 2.26% 2.39% 3.87%(c)
Ratio of net investment income to average
net assets*............................ 1.81% 1.75% 0.37%(c)
Portfolio turnover rate**................ 60% 78% 72%
</TABLE>
- ---------------
* During the year, 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 among 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 year from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to the public).
See Notes to Financial Statements.
75
<PAGE> 78
TIME HORIZON PORTFOLIO 2
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE PERIOD
JUNE 30, ENDED
1998 June 30, 1997(a)
------------ ----------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR......... $ 12.03 $ 10.39
------- -------
Income from Investment Operations:
Net investment income.............................. 0.29 0.29
Net realized and unrealized gains on investments
transactions..................................... 1.49 1.61
------- -------
Total income from investment operations.............. 1.78 1.90
------- -------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income........................................... (0.30) (0.26)
Distributions to shareholders from net realized
gains on investment transactions................. (0.37) --
------- -------
Total Dividends and Distributions.................... (0.67) (0.26)
------- -------
Net change in net asset value per share.............. 1.11 1.64
------- -------
NET ASSET VALUE PER SHARE, END OF YEAR............... $ 13.14 $ 12.03
======= =======
Total return......................................... 15.29% 18.49%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000).................... $ 390 $ 100
Ratio of expenses to average net assets............ 1.69% 1.59%(c)
Ratio of net investment income to average net
assets........................................... 2.35% 2.50%(c)
Ratio of expenses to average net assets*........... 2.00% 2.20%(c)
Ratio of net investment income to average net
assets*.......................................... 2.04% 1.89%(c)
Portfolio turnover rate**.......................... 60% 78%
</TABLE>
- ---------------
* During the year, 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 among the classes of shares issued.
(a) Period from July 22, 1996 (inception date) to June 30, 1997.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
76
<PAGE> 79
TIME HORIZON PORTFOLIO 3
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997 June 30, 1996(a)
------------- ------------- ----------------
<S> <C> <C> <C>
A SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR....................................... $ 12.95 $ 10.94 $10.04(d)
------- ------- ------
Income from Investment Operations:
Net investment income...................... 0.27 0.23 0.18
Net realized and unrealized gains on
investments transactions................. 2.22 2.00 0.77
------- ------- ------
Total income from investment operations...... 2.49 2.23 0.95
------- ------- ------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income........................ (0.23) (0.22) (0.05)
Distributions to shareholders from net
realized gains on investment
transactions............................. (0.55) -- --
------- ------- ------
Total Dividends and Distributions............ (0.78) (0.22) (0.05)
------- ------- ------
Net change in net asset value per share...... 1.71 2.01 0.90
------- ------- ------
NET ASSET VALUE PER SHARE, END OF YEAR....... $ 14.66 $ 12.95 $10.94
======= ======= ======
Total return................................. 19.96% 20.62% 9.46%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)............ $14,396 $10,483 $6,033
Ratio of expenses to average net assets.... 1.19% 0.99% 0.51%(c)
Ratio of net investment income to average
net assets............................... 2.04% 2.38% 3.29%(c)
Ratio of expenses to average net assets*... 1.54% 1.66% 3.32%(c)
Ratio of net investment income to average
net assets*.............................. 1.69% 1.71% 0.48%(c)
Portfolio turnover rate**.................. 70% 84% 66%
</TABLE>
- ---------------
* During the year, 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 among 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 year from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to the public).
See Notes to Financial Statements.
77
<PAGE> 80
TIME HORIZON PORTFOLIO 3
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE
ENDED ENDED PERIOD ENDED
JUNE 30, 1998 JUNE 30, 1997 June 30, 1996(a)
------------- ------------- ----------------
<S> <C> <C> <C>
B SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF
YEAR..................................... $ 12.86 $ 10.90 $ 10.04(d)
------- ------- -------
Income from Investment Operations:
Net investment income.................... 0.19 0.14 0.12
Net realized and unrealized gains on
investments transactions............... 2.09 1.98 0.78
------- ------- -------
Total income from investment
operations............................... 2.28 2.12 0.90
------- ------- -------
Less Dividends and Distributions:
Dividends to shareholders from net
investment income...................... (0.15) (0.16) (0.04)
Distributions to shareholders from net
realized gains on investment
transactions........................... (0.55) -- --
------- ------- -------
Total Dividends and Distributions.......... (0.70) (0.16) (0.04)
------- ------- -------
Net change in net asset value per share.... 1.58 1.96 0.86
------- ------- -------
NET ASSET VALUE PER SHARE, END OF YEAR..... $ 14.44 $ 12.86 $ 10.90
======= ======= =======
Total return (excludes sales charge)....... 18.34% 19.66% 8.98%(b)
Ratios/Supplemental Data:
Net assets at end of year (000).......... $41,868 $37,787 $16,441
Ratio of expenses to average net
assets................................. 1.94% 1.76% 1.34%(c)
Ratio of net investment income to average
net assets............................. 1.28% 1.59% 2.47%(c)
Ratio of expenses to average net
assets*................................ 2.29% 2.40% 4.08%(c)
Ratio of net investment income to average
net assets*............................ 0.93% 0.95% (0.27%)(c)
Portfolio turnover rate**................ 70% 84% 66%
</TABLE>
- ---------------
* During the year, 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 among 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 year from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to the public).
See Notes to Financial Statements.
78
<PAGE> 81
TIME HORIZON PORTFOLIO 3
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED ENDED
JUNE 30, 1998 June 30, 1997(a)
------------- ----------------
<S> <C> <C>
K SHARES
NET ASSET VALUE PER SHARE, BEGINNING OF YEAR............ $12.89 $10.48
------ ------
Income from Investment Operations:
Net investment income................................. 0.15 0.25
Net realized and unrealized gains on investments
transactions........................................ 2.24 2.34
------ ------
Total income from investment operations................. 2.39 2.59
------ ------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income.............................................. (0.22) (0.18)
Distributions to shareholders from net realized gains
on investment transactions.......................... (0.55) --
------ ------
Total Dividends and Distributions....................... (0.77) (0.18)
------ ------
Net change in net asset value per share................. 1.62 2.41
------ ------
NET ASSET VALUE PER SHARE, END OF YEAR.................. $14.51 $12.89
====== ======
Total return............................................ 19.30% 24.94%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000)....................... $ 533 $ 94
Ratio of expenses to average net assets............... 1.69% 1.59%(c)
Ratio of net investment income to average net
assets.............................................. 1.62% 1.53%(c)
Ratio of expenses to average net assets*.............. 2.03% 2.11%(c)
Ratio of net investment income to average net
assets*............................................. 1.28% 1.01%(c)
Portfolio turnover rate**............................. 70% 84%
</TABLE>
- ---------------
* During the year, 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 among 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 year from July 28, 1995 (initial seed date) through September 4,
1995 (initial sale of shares to the public).
See Notes to Financial Statements.
79
<PAGE> 82
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and
Shareholders of Time Horizon Funds
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of portfolio investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Time Horizon
Portfolio 1, Time Horizon Portfolio 2 and Time Horizon Portfolio 3 (constituting
Time Horizon Funds, hereafter referred to as the "Funds") at June 30, 1998, and
the results of each of their operations, the changes in each of their net assets
and the financial highlights for the year then ended, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at June 30, 1998 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above. The financial statements of the Funds for the prior periods
presented were audited by other independent accountants whose report dated
August 8, 1997 expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
August 14, 1998
80
<PAGE> 83
Time Horizon Funds
103 Bellevue Parkway
Wilmington, DE 19809
<TABLE>
<S> <C>
------------------
Bulk Rate
U.S. Postage
PAID
New York, NY
Permit No. 8048
------------------
</TABLE>
TMH-0086
