CTTH CTT Pharmaceutical Holdings Inc (PK)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of

Horizon Active Asset Allocation Fund and

Horizon Active Income Fund and

The Board of Trustees of

AdvisorOne Funds

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Horizon Active Asset Allocation Fund and Horizon Active Income Fund, each a series of AdvisorOne Funds (the “Funds”), as of November 30, 2013 and with respect to Horizon Active Asset Allocation Fund, the related statement of operations for the year then ended, and the statement of changes in net assets and the financial highlights for the year then ended and for the period January 31, 2012 (commencement of operations) to November 30, 2012, and with respect to Horizon Active Income, the related statement of operations, statement of changes in net assets and the financial highlights for the period September 30, 2013 (commencement of operations) to November 30, 2013.  These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.  

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian and brokers or through other appropriate auditing procedures where replies from brokers were unable to be obtained.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Horizon Active Asset Allocation Fund  and Horizon Active Income Fund, as of November 30, 2013, and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated above, in conformity with accounting principles generally accepted in the United States of America.

TAIT, WELLER & BAKER LLP

Philadelphia, Pennsylvania

January 29, 2014

Horizon Funds

DISCLOSURE OF FUND EXPENSES (Unaudited)

November 30, 2013                   

As a shareholder of the Fund you incur ongoing costs, including management fees and other Fund operating expenses.  This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  Please note, the expenses shown in the tables are meant to highlight ongoing costs only and do not reflect any transactional costs.

This example is based on an investment of $1,000 invested for the period of time as indicated in the table below.

Actual Expenses :  The first line of the table provides information about actual account values and actual expenses.  You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period.  Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.

Hypothetical Examples for Comparison Purposes :  The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return.  The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.  You may use this information to compare the ongoing costs of investing in the Fund and other funds.  To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs which may be applicable to your account.  Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.  In addition, if these transactional costs were included, your costs would have been higher.

  *Expenses Paid During the Period are equal to the Fund’s annualized expense ratio of 1.42%, multiplied by the average account value over the period, multiplied by 183 days, and divided by 365 (to reflect the number of days in the period).

Horizon Funds

DISCLOSURE OF FUND EXPENSES (Unaudited) (Continued)

November 30, 2013                   

  **Expenses Paid During the Period are equal to the Fund’s annualized expense ratio of 1.24%, multiplied by the average account value over the period, multiplied by 61 days, and divided by 365 (to reflect the number of days in the period).

  ***Expenses Paid During the Period are equal to the Fund’s annualized expense ratio of 1.24%, multiplied by the average account value over the period, multiplied by 183 days, and divided by 365 (to reflect the number of days in the period).

Horizon Funds

SUPPLEMENTAL INFORMATION (Unaudited)

November 30, 2013

FACTORS CONSIDERED BY THE TRUSTEES IN APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT *

At a meeting of the Board of Trustees (the “Board” or the “Trustees”) of the AdvisorOne Funds (the “Trust”) held on July 25, 2013 (the “Meeting”), the Board, including the disinterested Trustees (the “Independent Trustees”), considered the approval of an Investment Advisory Agreement (“Investment Advisory Agreement”) between the Trust and Horizon Investments, LLC (“Horizon Investments” or the “Adviser”) with respect to the Horizon Active Income Fund (the “Fund”).

The Board discussed the written materials that were provided in advance of the Meeting, Horizon Investment’s oral presentation and other information that the Board received at the Meeting, and deliberated on the approval of the proposed Investment Advisory Agreement with respect to the Fund, in light of this information. The Board relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the proposed Investment Advisory Agreement and the weight to be given to each such factor. The conclusions reached by the Trustees were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the proposed Investment Advisory Agreement

Nature, Extent and Quality of Services.  The Board reviewed the materials provided by Horizon Investments related to the proposed Investment Advisory Agreement with the Trust, including Horizon Investments’ ADV, a description of the manner in which investment decisions are made and executed, a review of the professional personnel performing services for the Fund, including the team of individuals that primarily monitor and execute the investment process and an organization chart of Horizon Investments.  The Board discussed the extent of Horizon Investments’ research capabilities, the quality of its compliance infrastructure and the experience of its fund management personnel, and noted their excellent credentials including one team member with a CFA designation.  The Board reviewed the description provided by Horizon Investments of its practices for monitoring compliance with funds’ investment limitations, noting Horizon Investments’ CCO periodically reviews the portfolio managers’ performance of their duties to ensure compliance with the compliance program.  The Board reviewed the capitalization of Horizon Investments based on financial information provided by the Adviser. The Board concluded that Horizon Investments has the resources to provide quality advisory services in a manner that is consistent with the Board's expectations.

Performance.  Because the Fund had not yet commenced operations, the Trustees could not consider its past performance. However, the Trustees considered the performance of the other fund in the Trust managed by Horizon Investments, as reflected in the Trust’s quarterly performance reports. Additionally, they considered the performance of the ETF Fixed Income Component (the “Component”), a strategy that is not available for purchase as a stand-alone product, but will be part of Horizon Investments’ strategy for the Fund, the Trustees noted the outperformance of the Component, relative to its benchmark, the Barclays Aggregate Bond Index, for the 1 year and since inception (12/31/2010) periods. For the one year period, they noted the Component returned 1.84% versus the benchmark’s negative returns of 0.69%. The Trustees considered the relatively short time period of performance provided, but agreed that the returns demonstrate that Horizon Investments has the ability to successfully manage a bond portfolio and should be given the opportunity to demonstrate its ability to manage the strategy over the long-term. Since inception they noted the Component returned 5.13% versus 3.77% by the benchmark. The Trustees noted that while past performance is no guarantee of future results as to this or any other fund, the Board concluded that Horizon Investments has the potential to deliver reasonable performance.

Fees and Expenses.  The Board noted that Horizon Investments proposed to charge an annual advisory fee of 0.77% based on the average net assets of the Fund. The Board reviewed the proposed advisory fee to be paid to Horizon Investments and the proposed fee waiver agreement to limit total operating expenses to 0.99% and 1.24% of the average daily net assets of the Fund’s Class I and Class N shares, respectively, through March 31, 2015.  The Board noted that the fees, as compared to a peer group of funds in the nontraditional bond fund category were in line

Horizon Funds

SUPPLEMENTAL INFORMATION (Unaudited)

November 30, 2013

with those of its peer group (0.78% average) and Morningstar category average (0.83%). The Board also considered the averages and ranges of Net Expense Ratios among the Fund’s benchmarks, noting the Fund’s Net Expense Ratio was in line with its peers.  The Trustees concluded that the Fund’s proposed advisory fee as well as its overall expense ratio, was reasonable in light of the quality of the services the Fund is expected to receive from the Adviser and the level of fees paid by a peer group of similarly managed mutual funds.  

Profitability .  As to profitability, the Trustees discussed the total fees expected to be paid to Horizon Investments and noted that Horizon Investments will receive soft dollar payments in connection with its relationship with the Fund in addition to the advisory fee earned pursuant to the Investment Advisory Agreement.  The Trustees reviewed a profitability analysis prepared by Horizon Investments, noting Horizon Investments anticipates earning a modest profit, and the Board determined that based on the information it received and its own understanding of the costs of managing a fund, that profitability was reasonable.   

Economies of Scale.  As to the extent to which the Fund will realize economies of scale as it grows, and whether the fee levels reflect these economies of scale for the benefit of investors, the Trustees discussed Horizon Investments’ expectations for growth of the Fund.  After consideration, the Board concluded that any material economies of scale would not be achieved in the near term.

Conclusion . Having requested and received such information from Horizon Investments as the Board believed to be reasonably necessary to evaluate the terms of the Investment Advisory Agreement, and as assisted by the advice of independent counsel, the Board, including a majority of the Independent Trustees, determined that approval of the Investment Advisory Agreement was in the best interests of Horizon Active Income Fund and its shareholders.

* Due to the timing of the contract renewal schedule, these deliberations may or may not relate to the current performance results of the Fund.

Horizon Funds

SUPPLEMENTAL INFORMATION (Unaudited) (Continued)

November 30, 2013

Trustees and officers of the Trust, together with information as to their principal business occupations during the last five years, are shown below.  The term of office of each Trustee listed below will continue indefinitely.  Unless otherwise noted, the address of each Trustee and Officer is 17605 Wright Street, Omaha, Nebraska 68130.  

Horizon Funds

SUPPLEMENTAL INFORMATION (Unaudited) (Continued)

November 30, 2013